Vodafone Idea could go bankrupt if forced to pay Govt's fees


6pack

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Vodafone Idea will seek a waiver of interest and penalties payable on its licence fee dues even as analysts said the telco could be bound for bankruptcy if it’s asked to shell out $4 billion (Rs 28,309 crore) after the Supreme Court ruled on the definition of adjusted gross revenue for telecom companies.
The Supreme Court judgement backing the government’s broader definition of adjusted gross revenue to include non-core items “has financial implications and represents a significant event with respect to the company,” Vodafone Idea said in an exchange filing Friday.
The telco is reviewing the ruling and plans to engage with the Department of Telecommunications to urge it to “consider granting relief, including a waiver of interest and penalties.”
Vodafone Idea’s stock plunged to a 52-week low of Rs 3.66 on Friday before closing at Rs 4.11 on the BSE. The shares had plunged over 23% after the court’s ruling on Thursday.
Analysts said if Vodafone Idea is denied relief by the government, it would have a negative cascading effect on DoT, Vodafone Idea’s bankers, promoters & its customers.

“An upfront liability (of Rs 28,309 crore) for Vodafone Idea may move it to the National Company Law Tribunal (NCLT) if the government does not salvage the situation,” IIFL Institutional Equities said. Such an outcome “would be a lose-lose situation for all major stakeholders as it raises the risk of Vodafone Idea’s Rs 90,000 crore spectrum debt and its over Rs 30,000 crore exposure to banks going bad,” it said.
Should Vodafone Idea take the NCLT route, it said, the government could lose out on Rs 12,000 crore of annual receipts it collects from the company as spectrum dues.
Its bankers could be staring at forfeiting a portion of loans and its promoters – UK’s Vodafone Group Plc and the Aditya Birla Group – could lose control of the company as banks would have exposure on promoter funding for the recent rights issue.

Vodafone Idea’s 320 million customers may face service disruptions if the company ends up in bankruptcy court, it added.

Credit Suisse said Vodafone Idea would need an immediate equity infusion, while brokerage Kotak said arranging another large share sale to fund huge licence fee pay outs won’t be easy for the promoters as the “amounts are a multiple of the company’s current market capitalisation,” which stood at a modest Rs 11,810.24 crore on Friday.
Analysts said things could really spin out of control if DoT asks the telco to shell out an additional Rs 11,000 crore towards outstanding spectrum usage charges, which is also computed based on AGR.
Against a total pay-out of $5.5 billion in unpaid licence fees and SUC dues, the telco has $3 billion of cash, noted Nitin Soni, director (corporates) at global rating company Fitch. The telco also faces “a shrinking subscriber base, reduced cash generation and a stretched balance sheet.”
 

nRiTeCh

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I wonder what makes vodafone continue its biz here amid tons of loses!! It should quit India and better focus on UK region where it belongs.
They should had quit 2 yrs ago when jio kicked their butt too hard among Idea and Airtel as well. Merging with Idea was a big mistake increasing their loses further.
 
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6pack

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Even Airtel has lot of dues to pay.


Looks like 5G spectrum sale will be flop since no one has money now or in next few months.

Top Bharti AirtelNSE -0.55 % and Vodafone Idea executives spent the Diwali weekend scrambling to draft a response after the Supreme Court ordered telecom companies to pay dues that could be in excess of a cumulative Rs 1.3 lakh crore.
Executives of the companies plan to meet top government officials starting today on strategies, said people with knowledge of the matter. The two carriers have less than three months to pay what could add up to more than Rs 80,000 crore in licence fees and spectrum usage charges (SUC), following the Supreme Court order broadening the definition of adjusted gross revenue (AGR) to include non-core items.
Officials said the two are combing through the judgment and planning a financial and legal plan to raise funds that will allow them to stay viable.
“When the industry is under a death sentence, tomorrow looks like the least of your worries,” said Rajan Mathews, director general of lobby group Cellular Operators Association of India (COAI). “Certainly, 5G will be under the cloud of the ability of operators to continue their operations with any reasonable expectations of proper returns on their investment.”
 

6pack

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Seems like Vodafone might exit India.

https://economictimes.indiatimes.com/industry/telecom/telecom-policy/how-the-indian-telecom-industry-is-heading-towards-a-duopoly/articleshow/71849129.cms

A decade after its struggle in India, Newbury, England-based Vodafone Group has one foot out the door. CEO Nick Read said in September that the company isn’t keen to plow any more money into the local venture, in which Vodafone holds about 44%. A Vodafone Group spokesman declined to comment for this story, while Idea said Thursday that it isn’t aware if its British partner is looking to exit India.
 
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chiron

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No idea why they are dragging out selling BSNL to the Ambanis. If nothing, think of all the prime real estate they have all over the country.
 

6pack

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No idea why they are dragging out selling BSNL to the Ambanis. If nothing, think of all the prime real estate they have all over the country.
Lol. Maybe they want to bail both MTNL and BSNL out first though SBI or LIC and then sell it off.

Look at the mess Air India is in now. Congress should have sold it of two decades back to the Tata's.
 

ssslayer

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pratikb

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I wonder what makes vodafone continue its biz here amid tons of loses!! It should quit India and better focus on UK region where it belongs.
They should had quit 2 yrs ago when jio kicked their butt too hard among Idea and Airtel as well. Merging with Idea was a big mistake increasing their loses further.
They want indian customer data metadata or whatever you want to label it as.
Post automatically merged:

Lol. Maybe they want to bail both MTNL and BSNL out first though SBI or LIC and then sell it off.

Look at the mess Air India is in now. Congress should have sold it of two decades back to the Tata's.
Congress itself finished air india and put up the blue airline. Why would they sale it.