The condition of Vodafone Idea seems to be worsening because of the financial burden and continuous subscriber reduction. On Tuesday, the shares of Vodafone Idea fell for the seventh session. The prime reason behind the reduction in the price of shares is linked to quarterly losses and default fundraising plans. As reported by ET Telecom, the balance sheet of the financially distressed telco shows that the liabilities of Vodafone Idea is much more than the profit & loss statement. Bankruptcy is on the verge for telecom operators if funding plans are not executed along with financial aid from the government.
Vodafone Idea’s Net Debt at the end of June Quarter was Rs 1,90,670 Crore
Talking about the financial figures of the telco, the net debt at the end of the June quarter was Rs 1,90,670 crore with a cash reserve of just Rs 920 crore. The AGR liabilities of the telco stand at Rs 62,180 crore. The scrip of the telco reported a 5.19% reduction to Rs 5.66 on the BSE. If you are not aware, the company’s debt is nearly 12 times greater than its market capitalisation of Rs 16,264.23 crore.
Government Intervention is Essential to Sustain the Market Structure
Edelweiss Securities expressed its opinions and marked that the delay in capital raising has deteriorated the financial credibility of the telco. To revive the telco, government intervention would be essential. Along with a relief package, the next round of tariff hikes would also aid the telco in elevating the ARPU. The government of India is expecting the promoters of the financially distressed telco to infuse equity and show their commitment to Indian telecom operations.
In other development, Vodafone Idea is investing its efforts in curating a creative petition in case the Supreme Court will reject its review petition seeking correction in the calculation strategy by the telecom department. The subscriber loss of Vodafone Idea increased 1.24 crore to 25.54 crores in the June quarter. The reduction in revenue and subscriber count was affecting Ebitda due to the higher fixed cost of the business. To provide immediate liquid support, a capital raise or government relief package will be essential for the telco.