Distress Call: Vodafone Idea again presses for tariff floor price

Distress Call: Vodafone Idea again presses for tariff floor price


The telco is seeking a one-year moratorium on payment of spectrum instalment of over Rs 8,200 crore, due in April 2022, according to reports.

Unable to unilaterally raise tariffs, which is affecting its fund-raising plans, Vodafone Idea has once again sought regulatory intervention for fixing floor price for telecom tariffs. “The biggest issue that is a problem in this sector today is the pricing which is much lower than it needs to be. A tariff hike is absolutely needed. We believe that floor pricing remains the best and the most preferred way to fix this issue,” Ravinder Takkar, managing director and CEO, VIL told analysts in a post-earnings call on Friday.

He said that all industry representations made to the Telecom Regulatory Authority of India (Trai) have highlighted that that a floor pricing is needed for telecom tariffs and results of the consultation are awaited.

However, it remains to be seen if the government and the regulator are again keen to pursue this proposal. As of last year, Trai is understood to have dropped the proposal of putting in place floor prices for both data and voice tariffs, as it felt that the health of the telecom operators had improved post December 2019 tariff hikes and the Supreme Court allowing them to pay their adjusted gross revenue (AGR) dues in instalments over a 10-year period.

Vodafone Idea, which badly needs to hike tariffs once again, has not been able to do so as competitors, Reliance Jio and Bharti Airtel, are not doing so, and unilaterally, hiking tariffs can hurt it more than bringing any gains. On its part, Bharti has also said that tariffs need to go up but it cannot do so unless Jio does the same as its tariffs are at a premium to that of Jio’s.

Takkar further said that given the pricing situation and the resultant stress on the entire telecom industry, the company has also written to the department of telecommunications (DoT) to further extend the moratorium on spectrum payments. The telco is seeking a one-year moratorium on payment of spectrum instalment of over Rs 8,200 crore, due in April 2022, according to reports.

He said that the two-year moratorium was granted by the government because there was stress in the industry and there were challenges which were not allowing operators to make those spectrum payments. He added that while some of those issues like the AGR have been addressed to some extent, other significant issues like the pricing continue to remain. “Unless those big elements are addressed, in some ways the stress will continue. I think it is only reasonable to say that the government will have to provide an extension to the moratorium,” he said.

VIL, which has a gross debt of Rs 1.8 lakh crore has seen its operating metrics not just remain the lowest in the industry, but also deteriorate continuously compared to previous quarters. According to reports, the company’s lenders have sought the finance ministry’s intervention to provide some relief to the beleaguered telco. Takkar declined to comment on it.

However, responding to an analyst query on the hurdles that VIL faces in concluding the much-needed fund-raising, he said, “The biggest hurdle is that the overall industry is under stress due to the pricing situation. As soon as the pricing improves, this creates significant and long-term confidence not only in the industry players but overall starts to show in the positive returns for the industry. And that I think can drive significant amount of investments not only from new but also existing investors into the business.”

In September last year, VIL had said that it will raise funds to the tune of Rs 25,000 crore, which would enable it to meet its payment of AGR dues’ instalments and that of deferred spectrum. However, despite being in discussions with several investors over the last 10 months, the company has not been able to close it. “We are fully engaged with investors. There continues to be interest, and we will announce something as soon as the company is in a position. No deadline has been set, and I cannot talk about any timelines,” he told analysts.

VIL has again posted a big loss of Rs 7,023 crore during the January-March quarter, which widened significantly compared to the previous quarter’s Rs 4,540 crore.

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