Vodafone Idea CEO Akshaya Moondra on Wednesday said the company is expected to conclude its funding arrangements in the October-December quarter. The funding structure, which includes both equity and debt, have progressed well in the last couple of months, Moondra said during an earnings call with analysts post April-June quarter.
“Particularly in the last one month some of these discussions have started progressing to a level of due diligence or proposals being discussed with these investors,” Moondra said.
“I think we are making good progress and we expect to conclude these discussions in the coming quarter,” Moondra added.
Comments from Moondra came after the telecom operator received commitment from one of the promoter to provide direct or indirect financial support to the extent of Rs 2,000 crore, for meeting its payment obligations.
“As far as debt funding is concerned we have been engaged with our consortium of banks for a long time. Generally their ask is that equity also needs to be tied up and we disclosed that promoters have already given us a support of Rs 2,000 crore of equity and some external equity needs to be tied up, and with that the bank funding will also be tied up,” Moondra added.
Vodafone Idea has been trying to raise external funds worth around Rs 10,000 for over a year now. However, a delay in dues conversion by the government into equity also affected the progress on the company’s plans to raise funds.
Once the funding is in place, the company will use the funds to invest in current 4G network expansion as well as 5G rollout to arrest its subscriber churn.
Moondra said the company has significant payment of debt in the July-September quarter and therefore, the support from promoters was crucial. Vodafone Idea has also sought a 30 day grace period from the department of telecommunications (DoT), for paying its second annual installment for 5G spectrum worth Rs 1,680 crore.
“With the cash generation and payment from promoters, we will be able to manage our debt in this quarter (July-September). From next quarter (October-December), our debt servicing burden goes down significantly roughly at about Rs 500 crore, followed by Rs 1,700 crore in the following quarter and another Rs 500 crore,” Moondra said.
Overall, the total debt obligation on the company from October to June 2024 is around Rs 2,700 crore, as against the cash generation of Rs 6,000 crore, Moondra said, adding that the company from October-December quarter will also start making payments to vendors.
Vodafone Idea is currently the only operator which has not rolled out 5G services yet. On the consequences of not meeting minimum rollout obligation, Moondra said, “out of 17 circles where we have acquired the spectrum, in two of the circles we have applied for compliance where we have done some minimal investments. In the remaining circles, as per NIA (notice inviting application for spectrum) there is a need to take damages which are applicable”.
On not meeting the 5G rollout obligation in 15 circles over a period of 26 weeks, the company’s penalty is expected to be about Rs 12-13 crore.
“Our intent is not to look at doing only the MRO (minimum rollout obligation) thing for 5G, we would want to rollout a commercial network,” Moondra added.
With regard to the entry-level plan of Rs 99, the company has now reduced the validity of plan to 15 days from 28 days in 11 circles. In Haryana, the company has removed the Rs 99 plan and increased the tariff to Rs 127 with a validity of 28 days.
“This has definitely given us an uplift in the current (July-September) quarter. The impact on subscriber churn in the initial period is not much. In Mumbai, it has been three months since we have changed the plan and it is showing positive impact there,” Moondra said.
Vodafone Idea reiterated its demand for tariff hikes and said while it may not be able to lead but follow the competition which has higher market share.
Moondra said the telecom operators need to change the current tariff structure and charge customers based on their usage. At the higher level of data usage, the users should be charged at higher rates for telcos to increase their average revenue per user (Arpu).
Vodafone Idea’s net loss for the April-June quarter widened to Rs 7,840 crore from Rs 6,419 crore in the preceding quarter. The company’s revenue from operations rose 1.2% QoQ to Rs 10,655.5 crore.
In the April-June quarter, the company lost 4.5 million mobile subscribers, taking its subscriber base to 221.4 million at the end of June. Vodafone Idea’s blended churn of subscribers rose to 3.9% during the quarter compared to 3.8% in April-June period.