Officials of the Department of Telecommunications (DoT) are understood to have held regular meetings with senior executives of Vodafone Idea over the past few days, as the government tries to work out a revival package for the financially distressed telecom sector, the immediate beneficiary of which would be the ailing telco.
Aditya Birla Group chairman Kumar Mangalam Birla, who resigned as Vodafone Idea (VIL) chairman last month, met communications minister Ashwini Vaishnaw on Wednesday, according to sources. VIL MD and CEO Ravinder Takkar and SBI chairman Dinesh Kumar Khara met telecom secretary Anshu Prakash on the same day.
Sources told FE that one issue which is a matter of concern for the government is the statement by the promoters that they will not put any more equity into the company. Officials in the DoT are trying to understand whether this stance would change if the government offers a revival package to the sector. If not, the officials believe Vodafone Idea’s problems may not get resolved in the long term and it may again approach the government in a year or two.
Though the promoters putting in equity is not a pre-condition at this stage, the government officials are trying to convince the company executives that if the former works out a revival package, the latter should also come forward and infuse more capital. “It should be a two-way process,” an official said.
In an analyst call on July 23, Vodafone Group CEO Nick Read had said Vodafone Idea is navigating through difficult times and though the group is providing “practical support”, it will not invest fresh equity. “…it is…a highly stressed situation, a difficult situation that they are trying to navigate…we as a group try to provide them as much practical support as we can but I want to make it very clear, we are not putting any additional equity into India,” he had said.
In April 2020, when Vodafone Group had injected Rs 1,530 crore ($200 million) into VIL as part of a pact agreed upon during the 2018 merger between its Indian subsidiary and Idea Cellular, it had stated that the potential exposure of Vodafone Plc under this mechanism was limited to Rs 8,400 crore (€1.1 billion).
Birla has also said in the past that his group will not put in more money. In a June 7 letter to the Cabinet secretary, Birla offered his company’s stake in Vodafone Idea to any public sector, government or domestic financial entity which can keep it as a going concern. He stepped down as Vodafone Idea chairman on August 4.
Queries sent to Vodafone Group and Vodafone Idea with regard to the recent meetings remained unanswered.
UK-based Vodafone Plc and Aditya Birla Group hold 44.39% and 27.66% stakes, respectively, in VIL.
Sources in the DoT said a blueprint related to the revival package may be out next week. The government is working on a package, which includes reducing the revenue share licence fee to 6% of the operators’ adjusted gross revenue (AGR) from the current 8%. This would be done by reducing the 5% universal service obligation levy by two percentage points.
Since the Telecom Regulatory Authority of India (Trai) had given its recommendations to this effect in January 2015, there would be no need to once again seek the regulator’s views.
The reduction in the licence fee by two percentage points would provide a relief of around Rs 3,000 crore annually to the operators.
Besides, the moratorium for spectrum payments may be extended by a year or two.
Sources said the government is also considering further liberalising the FDI norms for the sector, which would incorporate doing away with the scrutiny of sources of funds, making it easier for VIL to raise the same from the overseas market.
According to sources, so far the home ministry has given approval to the company to raise Rs 15,000 crore, while it plans to raise up to Rs 25,000 crore.