In the analyst call held after Vodafone Idea announced its Q3 FY24 results on January 29, some takeaways. Extracts from Akshaya Moondra’s presentation.
No monetisation. The challenge, which we see today is that there’s no monetisation happening. In fact, the way 5G is priced today it is actually resulting in discounting of 4G also because whatever is being used on 5G that is not counted at all.
Funding. As for funding discussions, these are in progress with investors and given the nature of these discussions, we will not be able to respond to any queries on this subject. That commitment (of promoter Aditya Birla for Rs 2000 crore infusion into the company for meeting impending payment obligations,) still stays, they are also committed ultimately to provide this as equity funding but as things stand now, that will also be part of the overall equity raise.
On CapEx plans. In Q4 (January-March) we still have fairly large debt servicing. In the next financial year Q1FY25, we will have to strike a balance between what we allocate to capex so that at least we are making some investments which can enable us to improve our cashflows, while in parallel also paying to the vendors.
Debt of Rs 5400 crore. The Rs 5,400 crore payment includes Rs 533 crore of spectrum payouts, the principal part. Then there is about Rs 3,200 crore-plus of bank debt and then there is Rs 1,600 crore of OCDs where repayment is dependent on whether conversion happens or not. If they are converted into equities, that Rs 1,600 crore will go out of this Rs 5,400 crore.
The easing of debt situation does help us in setting aside some capital or some cash for CapEx. However, we also have an overdue vendor position and in the first phase as cash is not going towards debt servicing, we will be able to use it towards reduction of vendor dues and that will be a first priority.
Vodafone Idea will prioritize payments of vendor dues from internal cash generation starting FY26, after settling a bulk of the outstanding debt of ₹5,400 crore in the next fiscal year,
5G. After funding is there, we will need, let’s say, 6–7 months to launch 5G, and by then the monetization will be clearer than it is today, and our strategy will be based on that. We will have to see the adoption of 5G once it starts getting charged.
In FY26, the government payout will be roughly ₹27,000–28,000 crore.
Expectation from govt. The telecom industry has asked the government to offset the blocked input tax credit against payments made on a reverse charge basis, and that government dues on spectrum payments can be accepted from the blocked input tax.
It could be very useful if the government can look at it favorably and do something about it because all telecom operators have a large lock-in. With investments already done in 5G spectrum and those payouts are also subject to GST, the GST blockage is really a bit unfair for the industry. Any support from the government will be very helpful.”