Vodafone Idea needs to raise money quickly, says India's DoT

Vodafone Idea needs to raise money quickly, says India's DoT

The pressure is still on Vodafone Idea (aka Vi), despite the Indian government taking a massive stake in the beleaguered operator. Third quarter dues are apparently overdue for payment, on top of which the Department of Telecommunications (DoT) is planning to closely monitor Vodafone Idea’s performance for the next three months.

The DoT is expected to ask the company for a date by which it might be making the full payment of licence fee and spectrum usage charges for the October-December quarter. If Vi can at least give a tentative date for making payments, the rules apparently permit it to pay interest on the amount it owes DoT for delayed payment but there will be no penalty payment.

DoT last week converted the firm’s accrued interest on deferred AGR dues into equity, making the Indian government the largest stakeholder in the company, though it has chosen not to have management control or a seat on the board. Now the question is whether the other owners — Aditya Birla Group and Vodafone Plc — will invest, thereby giving more confidence to external investors. 

The company certainly needs the money, with latest estimates of net debts coming in at around US$27billion and a lot of firms, such as Indus Towers, waiting to be paid. Then there’s the additional expense of network upgrades, and, of course, catching up on 5G rollout: rivals Jio and Airtel are a long way ahead of Vi, which has not yet started.

The DoT has reportedly made it clear that it will be monitoring Vi for the next three months, expecting it to raise the funds it needs to survive – and presumably compete – in the market.

Quoted in the Economic Times, an official said: "The telecom department hopes that they will move very fast, and how it (equity conversion) translates into cash in the next three months, is crucial.” An issue of equity shares may be the next step.

The DoT says it wants to retain the existing three-player market. The next few months will be about whether investors believe Vi can continue to be one of those players.

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