Woes deepen at Vodafone's India unit with industry "under stress"

(Alliance News) - Woes are deepening for Vodafone Group PLC's India unit as it seeks more time to ...

Alliance News 2 July, 2021 | 3:18PM
Email Form Facebook Twitter LinkedIn RSS

(Alliance News) - Woes are deepening for Vodafone Group PLC's India unit as it seeks more time to pay mobile network fees levied by the government, with creditor banks reportedly pleading with New Delhi to cut the firm some slack.

The debt-ridden joint venture has long been facing stiff competition in the market of 1.3 billion people from Bharti Airtel and Reliance Jio, which is owned by Asia's richest man Mukesh Ambani.

In a call to analysts Friday, Vodafone Idea said it has requested the Department of Telecommunications for a year's extension to pay INR82.9 billion, around USD1.1 billion, in mobile network fees due in April 2022.

The firm cited low tariff rates and other business environment challenges for its inability to generate sufficient cash from its operations.

"I think it is only reasonable to say to the government that they have to provide an extension to the moratorium until these pricing-related issues and the stress in the industry and the sector is removed," CEO Ravinder Takkar said. 

Indian banks with large outstanding loans to the firm have also reportedly written to the finance ministry expressing fears about a bankruptcy being triggered if the telecom operator is not granted relief on upcoming payments.

Vodafone Idea's total debt stood at INR1.86 trillion at the end of March 2021.

The company has been unable to meet its fundraising target of INR250 billion announced last September, with investors reluctant to lend to the cash-strapped firm.

Telecom firms have been struggling to survive ever since the 2016 launch of rival company Reliance Jio sparked a brutal price war, with Ambani promising Indians dirt-cheap internet and free calls.

"I think the biggest hurdle is that the overall industry is under stress because of the pricing situation," Takkar said, echoing comments by Sunil Mittal, the billionaire chairman of Bharti Airtel.

"To say the telecom industry is in a bit of trouble is an understatement," Mittal told reporters Thursday.

"It is in a tremendous amount of stress," he said, calling on the government to set a minimum guaranteed price for services to prevent firms from constantly undercutting each other.

Vodafone Idea is a partnership between British telecom major Vodafone and Indian conglomerate Aditya Birla.

On Wednesday, the firm reported a net loss of INR69.85 billion for the quarter ending March 2021.

Vodafone Idea's shares fell over 2.5% in Friday's trade. Over a quarter of the company's share value has been eroded in the last six months. Shares in Vodafone Group PLC rose 0.2% to 121.94 pence in London on Friday.

By Nivrita GANGULY

source: AFP

Copyright 2021 Alliance News Limited. All Rights Reserved.

Email Form Facebook Twitter LinkedIn RSS

Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Vodafone Group PLC 110.82 GBX -0.05

About Author

Alliance News

Alliance News provides Morningstar with continuously updating coverage of news affecting listed companies.