Troubled Indian telecom operator Vodafone Idea had a reprieve last week when the Supreme Court called for a staggered payment schedule of 10 years for Adjusted Gross Revenue dues.
But it still faces an uphill battle to remain afloat amid stiff competition and meet its obligation to pay about 583 billion rupees (US$7.96 billion) in dues to the government.
Vodafone Idea announced it will raise up to 250 billion rupees ($3.41 billion) and the board has approved fundraising through two methods – through the issue of shares or through non-convertible debentures.
Shares can be done through a public issue, preferential allotment or qualified institutional payments. Both fundraising routes have a cap of 150 billion rupees ($2.05 billion). The telecom operator is expected to make a call at its annual general meeting on September 30.
The Supreme Court verdict last Tuesday provided clarity to cash-strapped Vodafone Idea on how much cash it needs to pay as annual dues and for expanding its 4G network. The company will have to pay about 70 billion rupees a year in dues to the government.
Earlier, there were reports that Verizon and Amazon may invest more than $4 billion for a stake in Vodafone Idea. That led to a sharp uptick in the share value of the telecom company.
The company, however, said its board had no investment proposal to consider from the US wireless carrier or the e-commerce giant.
Telecom experts feel Vodafone Idea needs fresh equity, higher tariffs and concessions in various government levies to continue operations as well as to pay the annual installment of the dues to the government that include spectrum usage charges, license fees, interest, penalties and interest on penalties.
Analysts believe Vodafone Idea will need to more than double its average revenue per user to meet its government repayment obligations. Its revenue per user had fallen to 114 rupees in the June quarter from 121 rupees in the fourth quarter of fiscal year 2020.
The top court ordered an upfront payment of 10% on the total dues as demanded by the department of telecommunications by March 31. The remaining amount shall be paid in 10 equal installments at an interest rate of 8%.
Other than the dues to the government, Vodafone is also facing a shrinkage of its subscriber base amid stiff competition from Reliance Jio and Bharti Airtel. According to the telecom watchdog Telecom Regulatory Authority of India, Reliance Jio now commands 33.47% of the wireless market share, while Airtel has 28.31% and Vodafone Idea 27.57%.
When Vodafone Plc and Idea Cellular merged in August 2018, it was the market leader with 408 million users, but by the March quarter this year it has lost 117 million subscribers. Analysts say the company may have lost another 15 million users for the quarter ended June 30.