The government will hold around 33% in Vodafone Idea (Vi), post-conversion of the latter’s accrued interest liability (on deferred dues) into equity, while the telco’s promoters—UK’s Vodafone Plc and India’s Aditya Birla Group (ABG)—will collectively hold 50% in the company.
“Post-conversion of interest into equity, the government’s shareholding in Vi will be approximately 33%, while the promoters will hold 50%,” the telco’s managing director Ravinder Takkar said on Vi’s March quarter earnings call Wednesday.
The Department of Telecommunications (DoT) has computed the net present value (NPV) of the accrued interest due to the four-year deferral of spectrum and adjusted gross revenue (AGR) payments at Rs 16,133.1 crore, a calculation since confirmed by Vi. At present, UK’s Vodafone Plc and ABG own 47.61% and 27.38% in Vi respectively.
Vi’s management said the telco would repay a chunk of its upcoming Rs 8,160 crore debt—payable in the next 12 months—out of cash margins released after the recent return of bank guarantees (BGs), while around Rs 6,000 crore would be cleared from internal accruals.
Brokerage Nomura, though, said “Vi would require external fundraising and further tariff hikes to meet its upcoming Rs 8,200 crore debt repayment in FY23F”.
On the next round of price hikes, Takkar said Vi is looking to boost its average revenue per user (ARPU) further from the present Rs 124 level to Rs 200 in the short term and eventually to Rs 250 in the long term, especially since the wallet share of telecom services remains low.
“Tariff hike is an industry topic, but the pace (of such hikes) can definitely go faster, and there are opportunities to do this as telecom is still a very small piece of overall consumer spends, and given the value provided to customers, we believe it won’t create any challenges from an affordability perspective,” Takkar said.
Both Takkar and CFO Akshaya Moodra reiterated that Vi expects to close its long-pending Rs 10,000 crore fundraise from external investors shortly, but did not share any details. They said the telco is in “active discussions with banks and investors for further debt/equity funding for investments and would make subsequent disclosures as appropriate”.
Vi is known to have been in talks with US-based PE firms like Apollo Global.
Going forward, Moodra said “Vi’s annual capex levels could rise,” especially as the telco is set to close its funding discussion. The company’s capex investments, he said, would be focused around its 17 priority markets, and expanding 4G coverage is the immediate priority to hasten to 2G-to-4G user migrations.
Takkar and Moodra were speaking on the earnings call, a day after Vi’s net loss for the March quarter beat estimates while narrowing to Rs 6,544.9 crore from Rs 7,234.1 crore in the previous three-month period, supported by last November’s tariff hikes, which helped its ARPU coupled with a one-time gain.
Vi shares closed 1% lower at Rs 8.65 on the BSE Wednesday.
Takkar declined to comment on Vi’s upcoming 5G spectrum auctions strategy, saying it would hinge on the final spectrum pricing levels cleared by the Cabinet and details in the Notice Inviting Applications (NIA).
“While Trai has looked at the (5G spectrum) auction very carefully, industry will continue to seek further reduction in spectrum reserve prices and we hope to get improved terms on spectrum than what Trai and DoT are recommending at this point,” Vi’s MD said.
The communications ministry is known to have left it to the Cabinet to take the final decisions on the reserve prices of 5G airwaves and also on whether such spectrum would be auctioned for a period of 20 or 30 years. Telcos have been desperately calling for 5G base prices to be cut by 90% against the around 39% on average reduction on the 2018 prices that the regulator has recommended.
The Digital Communications Commission (DCC), the highest decision-making body of the Department of Telecommunications (DoT), has already accepted the regulator’s prices, which needs to be cleared by the Cabinet.