Vi has a gun to its head

The government expects Vi to move forward swiftly, raise funds within the next two months, bring in their own capital, and start 5G rollouts.

The telco is obliged to meet the minimum rollout obligations having bought 5G spectrum in last year’s auction.

As per the network rollout obligations, a telco has to commercially launch 5G services anywhere in each of the three metros within the first year from spectrum allotment. Also, at least one city has to be provided with 5G in each of India’s 22 telecom circles.

Non-compliance attracts a financial penalty, and if there is a delay of service launch of more than 52 weeks, the spectrum assigned can even be taken back. In the auction that ended on August 1, 2022, Vi had acquired 5G spectrum in the 3300MHz and 26GHz 5G bands for ₹18,799 crore.

The telco is also due to make the full payment of licence fee and SUC for OND quarter, having paid only 10 percent so far. Failing which, interest will be accrued for delayed payment.

Broadly, 8% of AGR is licence fee and 3-4% SUC, total would be in the vicinity of Rs 1000 crore. Vi, end-September had a net debt of Rs 2.2 lakh-crore. The dues to banks and other lenders, was Rs 15,080 crore, and to vendors was Rs 15,030 crore.

Background
The government has dilly-dallied since October 2022, when Securities and Exchange Board of India (Sebi) had approved the proposal to convert Rs 16,130-crore accrued interest on deferred AGR-related dues into equity. The delay cost Vi hugely. Lost subscribers, rising subscriber churn, a growing debt burden, reducing Ebitda margins, and losses on the balance sheet to list a few.

The government had imposed a condition: the conversion would happen only if the promoters of Vi — Birlas and Vodafone Group plc — made a reasonable commitment to put money into the company. The move was seen as reasonable by the government as Vi’s search for strategic investors and banks to raise Rs 25,000 crore had not fructified (it only brought in Rs 4,500 crore).

But despite several discussions, the promoters took an ambivalent stand on the matter. They made it clear that they would not invest in 5G. The Birlas even said that they were ready to sell their shares at a nominal cost to a new buyer. And Vodafone plc publicly stated it would not make any additional investment into the company.

CT Bureau