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Day after posting a Rs 50,897 cr loss, Vodafone Idea CEO calls for generous payment option for AGR dues

A day after Vodafone Idea posted a staggering loss of Rs 50,897 crore for Q2FY20, its MD and CEO Ravinder Takkar said that it would be “very, very helpful” if the government allowed the company a generous payment plan, spread over a large period of time to pay the Adjusted Gross Revenue (AGR) dues. Reducing the rate of calculating the AGR interest would be a “significant” help, he added. In comparison, the company had posted a net loss of Rs 4,908 crore in the previous quarter, meaning that losses soared by over 10x this quarter. This is the biggest quarterly loss in India’s corporate history, according to an Economic Times report.

Adding to Vodafone Idea’s financial woes, its parent company, the UK-based Vodafone Group has said that it will not inject further group equity in the company. Vodafone Group did not specify for how long they would not inject equity into Vodafone Idea.

Vodafone will file a review petition, might file a curative petition: During a call with the investors, Takkar said that the company is currently working on filing a review petition, challenging the Supreme Court’s recent ruling on AGR. He also said that a curative petition could be filed in front of a five judge bench, which will be different from the one that gave the AGR ruling.

What was SC’s verdict on AGR? Last month, the apex court had ordered telecom companies to include non-core income for calculation of Adjusted Gross Revenue (AGR), and asked them to pay Rs 92,640 crores to the Centre, which includes disputed demand, interest, and penalty.

Following the judgement, the Cellular Operators Association of India (COAI) had written to the Department of Telecommunications, seeking its intervention, and argued that such payments would lead to a crisis at the companies and would cause distress to the sector as a whole. While Bharti Airtel and Vodafone Idea had backed COAI’s views in the letter, their rival Jio criticised it and said that Airtel and Vodafone’s financial difficulties were their own doing and an effect of their own commercial decisions.

AGR verdict’s financial liability on Vodafone Idea: To pay for the AGR dues, the company has accounted for the estimated liability of Rs 27,610 crore related to License Fee and Rs 16,540 crore related to Spectrum Usage Charges up to September 30, 2019, including the interest, penalty and interest thereon of Rs 33,010 crore.

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Operational figures

  • Total revenue declined 3.8% QoQ and stood at Rs 10,840 crore. At Rs 21,131 crore, Bharti Airtel’s had more than twice the revenue than Vodafone Idea.
  • Average revenue per user (ARPU) decreased to Rs 107 this quarter from 108 in the previous quarter. Bharti Airtel’s ARPU for the quarter was Rs 128.
  • Total subscriber base also eroded to 311.1 million this quarter as opposed to 320 million in the previous quarter. Between Q2FY19 and Q2FY20, the subscriber base saw a 26.3% decrease. Airtel, on the other hand, saw a 13.2% decrease and had 304.7 million subscribers in Q2FY20.
  • Number of 4G subscribers continued to increase from 84.8 million in the last quarter to 90.3 million this quarter. Between Q2FY19 and Q2FY20, Vodafone Idea saw a 37.2% increase in the number of 4G subscribers. Takkar said that this was courtesy of good growth in the months of September and October.
  • Broadband subscribers also increased from 110.5 million to 112.2 million QoQ.
  • 10,000 massive MIMOs (multiple-input, multiple-output, which is a 5G technology) deployed till date.
  • Total data volumes grew by 8.4% to 3,492 billion MB compared to the last quarter. Total minutes on the network, however, declined by 6.7% during the quarter, primarily due to a reduction in incoming minutes.

Vodafone Idea staring at potential liquidation?

Following the Supreme Court’s verdict on AGR, Vodafone Group’s Nick Read had reportedly said that the condition of Vodafone Idea is critical and if the sector doesn’t get certain remedies, the company might potentially be looking at a liquidation scenario. Read later apologised to the Indian government, stating that this remarks were reported in a “distorted” manner, and that the company very much wanted to operate in India.

Vodafone Idea would prefer relief from the interest, the penalties and the interest on penalties that the company is liable to pay as part of the AGR verdict, Takkar said. Akshay Moondra, the company’s CFO, pointed out that the government still hasn’t paid GST tax credit of about Rs 7,000 crore to Vodafone Idea.

Indian telecom sector needs substantial help

Two big Indian telcos — Vodafone Idea and Bharti Airtel have posted eye-watering losses this quarter, owing to the SC’s AGR verdict. Vodafone Group’s refusal to inject further capital in Vodafone Idea is definitely a cause of concern for one of India’s biggest telcos.

“The government recognises that the telecom sector is under stress, and while some of it is due to the recent AGR ruling, a large part of it has been caused due to predatory pricing that has continued in this market,” Takkar said during the call with investors.

Waiting for CoS’ recommendations: Takkar said that the Committee of Secretaries (CoS) set up by the DoT has met “several times” and is close to making some recommendations for the relief of the sector. The Committee of Secretaries (CoS) headed by the Cabinet Secretary Rajiv Gauba has been formed to examine challenges faced by the telecom sector and suggest measures to mitigate the financial stress in the sector.

“They [government] have said to us that they want to see three private players and one public player in this sector.” — Takkar.

Are floor prices reducing? There is a possibility that the DoT might consider setting a minimum floor pricing for voice and data for tackling predatory pricing, Takkar said.

“This [reducing floor pricing] is the in the purview of the regulator, and the government, and it can be implemented. Also, at the same time, we know that it has been done in certain other countries in the region. So it’s not out of the art of possibility,” Takkar said.

Downloads: Financials | Quarterly Report

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Follow the sector: Bharti Airtel losses soar to Rs 23,045 crore, SC’s AGR verdict had ‘significant financial implications’

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