Woes escalate in Vodafone’s Indian unit
Mumbai: Woes worsen for Vodafone’s Indian unit as it seeks more time to pay government-imposed mobile network charges, with creditor banks apparently begging New Delhi to let the company slack off.
The debt-ridden joint venture has long faced fierce competition in the 1.3 billion-person market of Bharti Airtel and Reliance Jio, which is owned by Asia’s richest man Mukesh Ambani.
In a call to analysts on Friday, Vodafone Idea said it has asked the Telecommunications Ministry for a one-year extension to pay 82.9 billion rupees ($ 1.1 billion) in mobile network fees due in April 2022.
The company cited low tariff rates and other challenges related to the business environment for its inability to generate sufficient cash from its operations.
“I think it is only reasonable to tell the government that it needs to extend the moratorium until these pricing issues and stress in the industry and sector are lifted,” the CEO said. Ravinder Takkar.
Indian banks with large outstanding loans to the company have also reportedly written to the finance ministry expressing fears of bankruptcy if the telecommunications operator does not get relief on upcoming payments.
Vodafone Idea’s total debt stood at Rs 1.86 trillion at the end of March 2021.
The company was unable to meet its Rs 250 billion fundraising target announced last September as investors were reluctant to lend to the cash-strapped company.
Telecommunications companies have struggled to survive since the 2016 launch of rival company Reliance Jio sparked a brutal price war, with Ambani promising Indians cheap internet and free calls.
âI think the biggest hurdle is that the industry as a whole is under pressure due to the pricing situation,â said Takkar, echoing comments from Sunil Mittal, billionaire chairman of Bharti Airtel.
“To say the telecommunications industry is in trouble is an understatement,” Mittal told reporters Thursday.
“It’s under enormous stress,” he said, calling on the government to set a guaranteed minimum price for services to prevent companies from constantly undermining each other.
Vodafone Idea is a partnership between British telecommunications company Vodafone and Indian conglomerate Aditya Birla.
On Wednesday, the company reported a net loss of 69.85 billion rupees for the quarter ending March 2021.
Shares of Vodafone Idea fell more than 2.5 percent in trading on Friday. More than a quarter of the value of the company’s shares has been eroded in the past six months.