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Vi to use future funding to pay vendors and invest in 4G, 5G

Vodafone Idea Ltd.’s plans to utilise its future funding towards overdue payments to its vendors and 4G and 5G capital expenditure.

The cash strapped telecom operator is yet to receive funding that will help it stay afloat.

“Our growth capex in terms of expanding our 4G coverage and also rolling out 5G which will go side by side, will happen based on the new funding being tied up,” Akshaya Moondra, chief executive officer of the company said in an earnings call following its second quarter results.

Moondra added that the company will be able to conclude discussions with equity investors in the October to December quarter. Basis this equity funding, the banks “will process the request for bank funding and process their internal approval.”

The company’s second quarter capex spend stood at Rs 520 crore, in contrast with Bharti Airtel whose capex stood at over Rs 9,000 crore in the same period. Vodafone Idea is yet to roll out 5G and has seen no major site additions in the current fiscal.

“We continue to incur some minimal capex and that will continue as to the necessary capex in terms of where we are operating today,” Moondra said.

He further attributed the lack of investment that is preventing Vodafone Idea’s ability to “compete in the market and primarily the lack of 4G coverage.”

The company said in August that a promoter group has promised to infuse Rs 2,000 crore, if required. Its promoters, including Aditya Birla Group and Vodafone Group, hold 18.1% and 32.3% stakes, respectively, as of Sept. 30.

The company has added 18 lakh subscribers to its 4G network in the second quarter of FY24 to 12.47 crore. The overall subscriber based stood at 21.98 crore, witnessing a churn of 16 lakh, the lowest since quarterly subscriber decline since the merger.

Debt Breakup
The Aditya Birla Group and Vodafone Plc.-backed company’s existing debt payable by Sept. 30, 2024, stood at Rs 7,174 crore, according to a regulatory filing.

It includes Rs. 1,600 crores of Optionally Convertible Debentures to American Tower Corp. “..if those get converted, then this will not need to be serviced,” Moondra said.

The balance is bank debt including Rs 2,000 crore taken to meet the “short term funding gap.” Moondra said that the company will service this in a single tranche in the last quarter of FY24.

Moreover, the company reclassified debt of Rs 3,189.6 crore from non-current borrowings to current maturities of long-term debt “for not meeting certain covenant clauses under the financial agreements.” This is now payable until March 31, 2024.

Tax Provision
Following the Oct. 16 Supreme Court ruling that held that licence fee paid at regular intervals should be classified as capital expenditure, Vodafone Idea said that it created a tax provision for Rs 822 crore.

The company has provisioned for the interest amount without mentioning the exact figure. “We will not be able to share that with you separately because it is a mix of various things,” Murthy GVAS, the chief financial officer at Vodafone Idea said during the earnings call. “The tax figure was more relevant.”

However, he underscored that the interest provision is part of interest cost. The company’s finance cost from July to September was Rs 6,569 crore, up from Rs 6,398 crore in the first quarter.

Moondra said the company has not created any deferred tax asset against this tax adding that there is no immediate outflow of tax. He further added that Vodafone Idea is expected to get tax refunds which will offset the tax demand in this case, if any. Bloomberg

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