Vodafone preparing to exit India operations as telecom firm reels under $14 bn debt, mounting losses: Report

Vodafone's market capitalization is a measly Rs 11,091 crore, while the investments have been several billions of dollars, according to news reports

FP Staff October 31, 2019 19:51:11 IST
Vodafone preparing to exit India operations as telecom firm reels under $14 bn debt, mounting losses: Report
  • Vodafone-Idea may have to pay about Rs 40,000 crore after the SC verdict on AGR

  • Vodafone and Idea got merged in 2018 and changed its name to Vodafone Idea

  • In a statement, Vodafone Idea issued a clarification on the issue of having approached its lenders for debt recast

There have been reports in the media that Vodafone is preparing to exit its India operations. Vodafone Group Plc’s Indian venture is reeling under $14 billion of net debt, mounting losses and dwindling subscribers, according to a Bloomberg report.

On Wednesday, there were reports of Vodafone approaching government in the light of the Supreme Court verdict on Adjusted Gross Revenue (AGR). Under the AGR, Vodafone Idea will have to pay around Rs 28,309 crore in three months time.

The Supreme Court, last week, had upheld the government's way of computing the telecom revenue, from which dues like licence fee and spectrum usage charges are derived, and as a result Vodafone-Idea, Bharti Airtel and other telecom operators may have to pay the government a whopping Rs 1.4 lakh crore after including penalty and interest components.

Bharti Airtel faces the highest liability of around Rs 42,000 crore after including licence fees and spectrum usage charges, while Vodafone-Idea may have to pay about Rs 40,000 crore, after the Supreme Court verdict on AGR.

Vodafone Idea issued a clarification on the issue of having approached its lenders for debt recast in a statement: "There has been reportage in some media alleging that Vodafone Idea has approached its lenders for debt recast. We categorically deny and dismiss this as baseless and factually incorrect. We have not made any request for debt recast to any lender or asked for reworking of payment terms. We continue to pay all our debts as and when these fall due," the company said.

Following the sharp fall in shares, Vodafone-Idea clarified to stock exchanges on 25 October and again on Tuesday, this week, that "SC judgement represents a significant event with respect for the company (sic)", according to IANS.

Vodafone preparing to exit India operations as telecom firm reels under 14 bn debt mounting losses Report

Representational image. Reuters.

"We cannot presently comment on the correctness and completeness of the aforesaid figures. The company is studying the judgement and we will evaluate our next steps," it said. "The Judgement has financial implications, which we are reviewing. We will engage with the Department of Telecommunications (DoT) in order for it to consider granting relief, including a waiver on interest and penalties."

Its market capitalization is a measly Rs 11,091 crore, while the investments have been several billions of dollars, the report added.

On Thursday (today) shares settled in green after declining over 13 percent in day trade following a rating downgrade by Care Ratings.

Shares of the telecom operator ended up by 2.10 percent at Rs 3.89 apiece. Intra-day, the stock slumped 13.12 percent to its 52-week low of Rs 3.31 apiece on BSE. The stock gained 1.32 percent to Rs 3.85 at close on NSE. During the day, it declined 13.15 per cent to Rs 3.30 on the bourse.

In a media statement on the AGR verdict, the company said, "Vodafone Idea is extremely disappointed by the Hon'ble Supreme Court judgment on the Adjusted Gross Revenue (AGR) case. We will study the ruling as soon as it is available, along with our legal advisers, to determine next steps. If there are technical or procedural grounds for doing so, this could include a Review Application," the company said.

"Clearly this judgment has significantly damaging implications for India's telecom industry, which is already reeling under huge financial stress and is left with only four operators.

"Significant investment of several billion dollars has been made in creating world class networks. Today's order has huge impact on two private operators while most of the other impacted operators have exited the sector. We urgently request that the government engage on this matter in order to find ways to mitigate the financial stress for the industry", the company said.

In another setback, Vodafone-Idea announced last week that in regard to the merger of Indus Towers, in which it holds 11.15 percent equity, with Bharti Infratel, it has not been possible to meet the conditions, including DoT approval under the FDI regulations before the target date of 24 October. The parties have entered into an agreement to extend the date by two months to 24 December.

Vodafone Idea will receive a lower cash payment based on the fall in the share price of Bharti Infratel, movements in net debt at Bharti lnfratel and Indus.

--With IANS inputs

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