Vodafone Idea has sought two-years additional moratorium on spectrum payment of about Rs 10,000 crore due to high debt levels and stress on the balance sheet, PTI reported.
Vodafone Idea had net debt of INR 1092 billion as at 30 June 2018. Vodafone and Idea aim to generate INR 140 billion annual synergy, including Opex synergies of INR 84 billion by merging their operations.
The Department of Telecom and other departments will be discussing the matter in order to take a decision. Vodafone Idea needs to pay around Rs 10,000 crore this year for using the spectrum for running telecom business.
Vodafone India and Idea Cellular have participated in five spectrum auctions in 2010, 2012, 2014, 2015 and 2016 before merging their mobile business on August 31, 2018. Vodafone acquired spectrum worth Rs 79,343 crore in five auctions. Idea purchased spectrum worth Rs 63,597 crore in these spectrum auctions.
Vodafone Idea spokesperson said the telecom industry in November and December 2018 wrote to the India government seeking measures to improve its cash flow, reduce costs and regain financial strength to ensure the long-term health of the sector.
“One specific request was for the government to defer some spectrum payment obligations. Vodafone Idea supports these industry requests,” the spokesperson said.
The government in March last year enhanced number of annual installments for spectrum payment from 10 to 16 years to provide relief to the sector. India’s telecom sector has a debt of around 7.8 lakh crore.
Cellular Operators Association of India (COAI) in November approached DoT secretary Aruna Sundararajan to seek additional 2-year moratorium on payment of installments of spectrum won in auction and interest charges imposed on installments.
Industry bodies said that the telecom sector has lost 42 percent revenue from sales of telecom services on quarterly basis between April-June 2016 and July-September 2018. The debt of four mobile operators is at around Rs 5 lakh crore, with 60 percent of the liability is from spectrum payment obligations.
Telecom industry players said that it is tough time for sustainability of business in the present situation. The financial issues have the potential to expose banks and financial institutions to high level of bad loans.
“Vodafone Idea has announced its intention to raise up to Rs 250 billion of equity capital and both promoter shareholders have indicated that they would contribute up to Rs 182 billion,” the spokesperson said.
Vodafone Idea in a regulatory filing said its board will be meeting on January 23 to approve a proposal for raising funds, including through rights issue, qualified institutions placement, preferential allotment or any other mode.