Tariff hike key to sector revival; Birla, ABG, Voda committed to supporting telco: VIL CEO
Amid an existential struggle, Vodafone Idea on Monday said while its recent tariff tweaks are steps in the right direction, such changes are not enough to solve the industry’s structural issues, and tariff hikes and floor pricing remain critical for the sector revival.
Speaking during the Q1 earnings call, Vodafone Idea CEO Ravinder Takkar said although Kumar Mangalam Birla recently stepped down as chairman of Vodafone Idea, “he as well as Aditya Birla Group (ABG) and the Vodafone group are committing to providing support and guidance to the company, in line with the stated positions of both the groups”.
“We will thus continue to get the benefit of their experience and support,” Takkar said.
On fundraising, Takkar maintained that VIL continues to remain in active discussions with potential investors.
Citing the recent “tariff interventions” undertaken by VIL, including entry-level corporate postpaid plans and other offerings, Takkar said: “While these tariff interventions are steps in the right direction and will help in improving ARPU, such changes are not material enough to solve the structural issues that the industry is facing”.
The company continues to engage with the regulator on floor pricing, which is “critical and necessary” to improve the overall health of the industry, he observed.
“As mentioned by us, time and again, tariff hike remains a critical factor to revive the sector, and pricing structure has to change where operators have the ability to charge customers for incremental usage,” he pointed out.
The VIL top honcho further said that the company was “disappointed” by the Supreme Court’s move to reject pleas filed by telecom operators, including Vodafone Idea, seeking rectification of the alleged errors in the calculation of adjusted gross revenue (AGR) related dues, payable by them.
“Needless to say we were disappointed by the verdict. We have recently filed a review petition in the SC clearly indicating that the intent is not for us to challenge the judgement of the court, but to seek corrections in demand due in manifest errors,” Takkar said.
Vodafone Idea will be launching a music streaming service in partnership with a leading content provider that will be available to prepaid and postpaid consumers.
“We are also building a strong recommendation engine to offer a truly personalised experience to users. We are confident that VI (VIL) should be able to offer a truly delightful experience to our users comparable and better on many fronts than the current services available in the country,” Takkar informed.
The management’s commentary comes at a time when VIL is struggling to stay afloat.
The crisis-hit telco’s Q1 earnings and June quarter operational metrics announced on Saturday, left analysts disappointed.
Goldman Sachs note cautioned that the company has large repayments due starting December ’21, and at the current EBITDA (earnings before interest, taxes, depreciation, and amortisation) run-rate, Vodafone Idea could have a Rs 23,800 crore cash shortfall until April 2022.
As per the Q1 report card released by the telco, the total gross debt (excluding lease liabilities and including interest accrued but not due) as of June 30, 2021, of VIL stood at Rs 1,91,590 crore, comprising deferred spectrum payment obligations of Rs 1,06,010 crore and adjusted gross revenue (AGR) liability of Rs 62,180 crore that are due to the government.
The debt-ridden VIL posted a lower consolidated loss of Rs 7,319 crore for the first quarter ended on June 30, 2021, against Rs 25,460 crore loss a year ago.
The consolidated revenue from operations of Vodafone Idea declined by about 14 per cent to Rs 9,152.3 crore during the reported quarter from Rs 10,659.3 crore in the corresponding quarter of 2020-21.
Billionaire Kumar Mangalam Birla recently stepped down as chairman of Vodafone Idea Ltd, within two months of offering to hand over Aditya Birla Group’s stake in the debt-laden telco to the government in a bid to avert a crisis for the telecom company.
Last week, Vodafone Idea filed a review petition in the Supreme Court, after the apex court recently dismissed its plea for rectification of the alleged errors in the calculation of adjusted gross revenue (AGR) related dues.
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In its review petition, VIL has said it is “a travesty of justice” that the company is restrained from questioning the arithmetical errors/omission, which are going to cost it about Rs 25,000 crore (Rs 5,932 crore of principal plus interest, penalty and interest on penalty).
Vodafone Idea petition has said that its contentions have been rejected by the order under review, and this denial could result in the company going under and its about 27.3 crore subscribers being left “high and dry”. Other fallouts include loss of investment in the business and an impact on livelihoods of employees, as well as distributor, retailers, and store staff, the company has said.
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