Global Vendors Closely Monitoring VIL Situation, Say It's Business-as-usual

Global telecom gear makers are keeping a close watch on how things evolve for Vodafone Idea, which is in the grip of an existential crisis, but maintain that it is business-as-usual when it comes to on-ground network-related work.

A senior official of one of the European vendors said that things are not as yet "alarming" at this stage, while another player said it is too early to draw specific conclusions on outcomes, since the overall situation remains "fluid".

The telecom equipment makers are closely monitoring the situation to see the next move by cash-strapped Vodafone Idea Ltd (VIL). The next course of action will be determined by how the situation evolves, they said.

An official with a large telecom equipment company said VIL has been investing in its network, based on balance sheet and added that it had also moderated the capex based on the balance-sheet position.

A senior official of a Chinese telecom gear maker said that all players have been cautious since the last one-and-a-half year and the exposure is not high with VIL.

Many vendors are waiting to see whether or not relief measures will be offered by the government to the industry.

Industry watchers say any decision from the government on rationalisation of levies, or moratorium on spectrum dues could benefit the ailing VIL, which is struggling to stay afloat.

When contacted, a Nokia spokesperson said, "We continue to pursue business discussions and engagements as usual, while monitoring the situation. Our aim is to support our telco partner through this crucial phase."

Huawei, ZTE and Ericsson did not comment on an email by PTI on the issue.

Billionaire Kumar Mangalam Birla on Wednesday stepped down as chairman of Vodafone Idea Ltd, within two months of offering to hand over Aditya Birla Group's stake in the debt-laden telco over to the government, in a bid to keep the telecom company afloat.

Birla will be replaced by Himanshu Kapania (who was earlier managing director and CEO of Birla's Idea Cellular) as the new chairman of Vodafone Idea Ltd.

Subsequently, Vodafone Idea CEO Ravinder Takkar had reached out to employees urging the staff to continue focusing on providing quality services to customers and sustain intensity in the market.

Takkar had also sought to reassure employees that although Birla is stepping down from the board, he and the Aditya Birla Group "will continue to provide support and guidance to the company, in line with the stated position of the Group".

The Supreme Court, last month, had rejected petitions by telecom companies, including Vodafone Idea and Bharti Airtel, for rectification of alleged errors in calculation of adjusted gross revenue (AGR)-related dues, payable by them.

According to official data, VIL had an AGR liability of Rs 58,254 crore out of which the company has paid Rs 7,854.37 crore and Rs 50,399.63 crore is outstanding.

Birla had, in June this year, offered to hand over the group's stake in debt-laden VIL to the government or any other entity that the government may consider worthy to ensure that the company remains a going concern.

In a letter to Cabinet Secretary Rajiv Gauba on June 7, Birla had said investors are not willing to invest in the company in the absence of clarity on AGR (statutory dues) liability, adequate moratorium on spectrum payments and "most importantly floor pricing regime above the cost of service".

Without immediate active support from the government on the three issues by July, the financial situation of VIL will come to an "irretrievable point of collapse", Birla had said.

"It is with a sense of duty towards the 27 crore Indians connected by VIL, I am more than willing to hand over my stake in the company to any entity- public sector/government /domestic financial entity or any other that the government may consider worthy of keeping the company as a going concern," Birla had said in the letter.

In September 2020, VIL had received an approval from its board to raise up to Rs 25,000 crore. However, the company has not been able to raise the funds so far.

According to Birla's letter, VIL has not yet approached any Chinese investors. Foreign investors, mostly non-Chinese, are hesitating in making investment in the company for understandable reasons, he wrote.

VIL's gross debt, excluding lease liabilities, stood at Rs 1,80,310 crore as of March 31, 2021. The amount included deferred spectrum payment obligations of Rs 96,270 crore and debt from banks and financial institutions of Rs 23,080 crore, apart from the AGR liability.

Earlier, Vodafone Idea had also approached the government to seek one-year moratorium on payment of spectrum instalment of over Rs 8,200 crore, due in April 2022.

VIL, in a letter to the telecom secretary on June 25, 2021, had said it will be "unable to pay the instalment of Rs 8,292 crore due on April 9, 2022" due to "cash being used for payment of AGR (adjusted gross revenue) dues and the inability of the operations to generate the required cash in a predatory pricing situation".

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