Troubled Indian telecom operator Vodafone Idea said it has paid license fee dues for the April-June quarter, denying media reports it did not have the cash to do so.
This announcement came after media reports that the cash-starved company had been unable to pay the full license fee for the quarter and fallen short by nearly 1.5 billion rupees, the Press Trust of India reported.
An earlier report by the Times of India said Vodafone Idea’s telecom license fee for the first quarter was about 6.9 billion rupees, but it could pay only around 5.4 billion rupees.
Vodafone Idea is facing an existential crisis and as of June 30, its gross debt was 1.91 trillion rupees (US$25.68 billion). The company owes the government a deferred spectrum payment of 1.06 trillion and the Supreme Court mandated adjusted gross revenue liability of 621.80 billion rupees.
For the quarter ended June 30, Vodafone Idea had narrowed its losses to 73.19 billion rupees, as against 254.60 in the year-ago quarter. Consolidated revenue from operations had fallen 14% to 91.52 billion rupees from 106.6 billion rupees.
On August 4, billionaire industrialist Kumar Mangalam Birla decided to step down as non-executive director and non-executive chairman of Vodafone Idea. He was succeeded by Himanshu Kapania.
Birla, who owns more than a 27% stake in Vodafone Idea, earlier told the government he was willing to give up his stake in the company to keep it afloat. In a letter to Union Cabinet Secretary Rajiv Gauba on June 7, Birla expressed a willingness to offer his stake to any state-owned or “domestic financial entity” to keep the company afloat.
Vodafone India merged with Idea Cellular, run by the Aditya Birla Group, on August 31, 2018, to withstand the predatory competition unleashed by Reliance Jio, run by India’s richest man, Mukesh Ambani.
However, it has been facing losses and slipped from being the country’s leading telecom operator to third position with about 270 million subscribers. Reliance Jio now leads the market with more than 427 million subscribers, followed by Bharti Airtel (353 million).
It had earlier tried raising funds by bringing in investors. But even after several rounds, it has not been successful. The company also expects to raise up to $1 billion from the sale of its fixed-line broadband subsidiary, its optical fiber unit and data centers business.
The prominent lenders to the company include the State Bank of India (110 billion rupees), Yes Bank (40 billion rupees), and IndusInd Bank (35 billion rupees). If Vodafone Idea shuts down, they will have to make massive bad loan provisions and this is expected to affect their earnings performance in the coming quarters.
The closure could also mean a loss of thousands of direct and indirect jobs and affect small businesses that sell its products and services.
During an earnings call earlier this week, Vodafone Idea Chief Executive Officer Ravinder Takkar said the company was hopeful the government would offer necessary support to address structural issues faced by the telecom sector. Vodafone Idea has been pitching for floor price and favors a tariff hike to relieve the stress faced by the sector.