Birla offers to hand over Vi stake to keep telco afloat
“It is with a sense of duty towards the 27 crore (270 million) Indians connected by VIL, I am more than willing to hand over my stake in the company to any entity – public sector/government/domestic financial entity, or any other that the government may consider worthy of keeping the company as a going concern,” Birla said in a letter dated June 7 to Cabinet Secretary Rajiv Gauba. He further said potential foreign investors wanted the government to show clear intent of its keenness to have a three player telecom market.
The letter predated last month’s Supreme Court order which dismissed the plea of Vodafone Idea and other telcos to permit rectification of ‘arithmetical errors’ in the computation of adjusted gross revenue (AGR) dues.
Last week, senior officials told ET that while a government takeover of the telco had been informally discussed, it was unlikely. “The government and financial regulators have taken charge of companies such as Satyam, IL&FS and most recently DHFL,” a senior official said.
Sharp Decline in Liquidity Position
“But there were instances of financial irregularities, which is not the case in Vodafone Idea,” the official added.
Officials said options such as extension of moratorium in spectrum dues, reduction in licence fees and spectrum usage charges (SUC), and a prospective relook at the adjusted gross revenue (AGR) definition were under consideration. They acknowledged that it was possible that none of these measures were enough to ensure the survival of Vodafone Idea.
ABG and UK-based Vodafone Group Plc – the two parents of VIL – hold 27.66% and 44.39%, respectively, in the cash-strapped telco.
Vodafone Group declined to comment, but officials say the UK-based telecom major hasn’t sent in similar communication to the government.
Shares of VIL closed at Rs 8.2, down 0.2% on the BSE on Monday.
Birla said that over the last year, the telco has made all efforts to improve the operational efficiency of the company through prudent capital spending, manpower restructuring, and other cost cutting steps.
“Despite all that, the financial condition (particularly the liquidity position) of the company has sharply deteriorated,” he said.
The carrier has never reported a quarterly profit since the merger of Vodafone India and Idea Cellular on August 31, 2018 and has been rapidly losing customers to its rivals ever since. Plagued by a debt of Rs1.8 lakh crore, the telco is staring at a potential $3.1 billion (Rs 23,500 crore) shortfall in cash flows in FY23, given its upcoming payments including towards adjusted gross revenue (AGR) dues, spectrum payments and interest cost. Its net loss in the January-March quarter was Rs 6,985.1 crore and cash balance was at Rs350 crore.
“I and my team will be more than happy to work with the government to urgently explore all possible options and solutions to save the company and strengthen it in the national interest without any consideration of our private interest,” Birla said.
MERGER WITH BSNL
Deutsche Bank in a recent report said the government must back state control of VIL by quickly merging it with BSNL and recapitalising it.
But senior government officials appeared doubtful about the wisdom of such a move. They added that in the cases of DHFL and IL&FS, promoters were alleged to have siphoned off funds and small depositors stood to lose their money.
“However, this (VIL) is an entirely different case. There is no financial irregularity or scam as far as the subscribers are concerned. It is not as though they don’t have any alternate telecom operators to port out to,” an official said.
Another government official said merging VIL with BSNL was a “hard option”. “.. the government had already committed to reviving BSNL…taking on debt of over Rs1.8 lakh crore in Vodafone Idea’s case when its underlying business by the admission of its own promoter is suffering isn’t prudent,” he said.
He added that if Vodafone Idea was unable to carry on business while other telcos in the sector were operating well, then there were some operational issues with the carrier. “If the current promoters are hesitant to put in any further capital, it means that the business is not profitable. In such a scenario, why should taxpayer’s money be thrown down the drain?” he said.