Telco has sought 1 more year to pay its dues; extensions need to be uniform across the sector, says Department of Telecommunications
The department of telecommunications (DoT) will seek the finance ministry’s views on whether the two-year moratorium granted to telecom operators on payment of deferred spectrum instalment can be extended by another year.
The two-year moratorium was given to the telecom operators for FY21 and FY22, but Vodafone Idea has recently written to the DoT requesting for a one more year’s extension as it was unable to generate enough cash to pay the same. The company said the cash generated by it is going to meet its payment obligation towards adjusted gross revenue (AGR) dues.
Meanwhile, sources said to further press its case for extension of the moratorium by a year, Vodafone Idea CEO and MD Ravinder Takkar is expected to meet DoT secretary Anshu Prakash later this week.
Officials in the DoT said an extension in moratorium cannot be for one company and has to be for the entire sector. Further, it is a policy decision which has revenue implications, and therefore, concurrence of the finance ministry is required. Only then can an inter-ministerial group of officers examine the stress and provide relief measures. When the government granted the two-year moratorium in November 2019, which came into effect from March 2020, the same process was followed.
Officials said the DoT’s view continues to be that the sector needs three private players and one public sector operator.
If the moratorium is not extended, Vodofone Idea needs to pay over Rs 8,200 crore in April 2022 as deferred instalment for spectrum bought in past auctions. In its letter to the DoT secretary, the company has said it will be “unable to pay the instalment of Rs 8,292 crore due on April 9, 2022” due to “cash being used for payment of AGR dues and the inability of the operations to generate the required cash in a predatory pricing situation”.
The company has also said while it is working on raising new funding for the last six months, “investors are not willing to invest in the company because they believe that unless there is a significant improvement in consumer tariffs, the health of the industry will not recover and they will incur a loss on their investment”.
Justifying its demand for an extension in the moratorium period, Vodafone Idea has said that after the grant of a two-year moratorium earlier, AGR judgement was pronounced, which has taken away Rs 7,854 crore of cash as upfront payment. Also based on the current demands of the DoT, it will have to pay AGR instalments of about Rs 9,000 crore in March 2022. Given the company’s request for corrections on those demands, while the amount may reduce to nearly half, it will still take away liquidity to the extent of Rs 12,500 crore from the business.
In its post-earnings call with analysts on July 2, Vodafone Idea had said that it is unable to unilaterally raise tariffs, which is affecting its fundraising plans, and once again sought regulatory intervention for fixing floor price for telecom tariffs.
DoT officials said that since tariff is a domain of Trai, they can’t look into it.
In September last year, VIL had said that it will raise funds to the tune of Rs 25,000 crore, which would enable it to meet its payment of AGR dues’ instalments and that of deferred spectrum. However, despite being in discussions with several investors over the last 10 months, the company has not been able to close it. “We are fully engaged with investors. There continues to be interest, and we will announce something as soon as the company is in a position. No deadline has been set, and I cannot talk about any timelines,” the Vodafone CEO had told analysts.
VIL again posted a big loss of Rs 7,023 crore during the January-March quarter, which widened significantly compared with the previous quarter of Rs 4,540 crore.