Vodafone Idea can get $1 billion annual relief

A mix of lowered interest on deferred spectrum legal responsibility together with an interest waiver on its adjusted gross revenue (AGR) dues can garner practically $1 billion in annual relief for struggling (Vi) and increase its survival probabilities, BNP Paribas mentioned.

The world brokerage mentioned the loss-making telecom JV between UK’s Vodafone Plc and India’s Aditya Birla Group would have the ability to additional reduce its present Rs 1.9 lakh-crore debt burden if the federal government permits it to give up unused spectrum in non-priority markets, strikes that will assist the telco cut back the web current worth (NPV) of its total liabilities and enhance future money flows.

BNP Paribas’ tackle potential methods to rescue Vi comes days after Aditya Birla Group chairman Kumar Mangalam Birla met telecom minister Ashwini Vaishnav within the backdrop of the Department of Telecommunications (DoT) and finance ministry placing collectively a relief package deal for the debt-laden telecom sector.

“A 2% rate cut on Vi’s deferred spectrum liability would lower its annual interest burden by Rs 2,100 crore, and if the government foregoes the interest (component) on the telco’s AGR dues, it can result in an additional Rs 4,000-4,500 crore of annual relief,” BNP Paribas senior telecom analyst Kunal Vora mentioned in a be aware seen by ET. Such remedial measures would translate in upto Rs 6,600 crore of fast annual relief for Vi.

Vora added {that a} mixture of “a multi-pronged approach,” in the direction of debt discount coupled with a robust tariff hike that will increase Vi’s common income per person (ARPU) by Rs 30 from present ranges might put “the company on a recovery path”. Vi’s ARPU – a key efficiency metric — fell 3% sequentially to Rs 104 in June quarter, FY22.

BNP estimates a Rs 30 improve in Vi’s ARPU would end in Rs 9,000 crore annual further revenues.

Vi shares had been down 1.8% to Rs 7.13 in Monday early afternoon commerce on BSE.

The DoT has sought Rs 58,254 crore from Vi in the direction of AGR dues, of which the telco has paid Rs 7,854 crore. Vi’s AGR liabilities, together with interest, are actually at round Rs 62,180 crore, in response to DoT’s newest calculations, the corporate has mentioned. The telco, accordingly, wants to begin paying AGR instalments – roughly of round Rs 9,000 crore – from March 2022. Vi’s deferred spectrum legal responsibility, in flip, stood at Rs 1.06 lakh-crore within the quarter ended June.

BNP added that if the federal government permits Vi to give up under-utilised spectrum, the corporate might evaluation such wants and vacate airwaves in markets the place it has misplaced floor, which might additional “reduce its debt burden as well as losses”.

Analysts, although, mentioned offering any additional moratorium on clearing deferred spectrum dues gained’t clear up Vi’s issues as interest prices would maintain including to its total debt burden, which might make any fairness elevate tough in future.

Back in June, Vi had appealed to DoT to defer by a 12 months its spectrum funds of over Rs 8,200 crore falling due in April 2022.

Analysts mentioned if Vi, going ahead, is acquired by the federal government, it might face challenges in attracting non-public funding and in retaining/attracting prime grade worker expertise. “If Vi becomes majority-owned by the government, it may find it difficult to remain an attractive brand for high-value corporate or retail postpaid consumers who look for strong network, customer service and an aspirational brand,” BNP in a be aware.

Vi owes DoT greater than Rs 1.68 lakh-crore by means of deferred spectrum cost and AGR dues. The authorities would grow to be Vi’s largest shareholder if it decides to transform this debt into fairness.

Vi’s co-promoters, Vodafone Plc and Aditya Birla Group (ABG) personal 44.39% and 27.66%, respectively in Vi. Two months in the past, Birla had supplied ABG’s stake in Vi to any government-owned entity, cautioning that if the federal government didn’t convey out a relief package deal quickly then the corporate might go below. Aajka Samachar