Vodafone Idea defaults on rental, energy payments for June to tower firms

Vodafone Idea, the joint venture between Vodafone Group Plc and Aditya Birla Group, has defaulted on rental and energy payments for June to telecom tower companies.

According to a senior executive of a telecom tower firm, Vodafone Idea cited payment of adjusted gross revenue (AGR) to the government and the resultant cash flow problems for the default. 

“The company usually pays its dues by 3rd of every month, but this month we have not received any money. Vodafone Idea’s dues to all telecom companies run into several hundred crores,” the executive said. “It will lead to a chain reaction because we have to pay our own suppliers, including fuel companies,” he said.

Vodafone Idea has been facing a financial crunch since the Supreme Court ordered it to pay Rs 54,000 crore as AGR to the government. For the financial year ended March 2020, the company, in which Vodafone Plc of the UK owns 45 per cent, reported a loss of Rs 73,131 crore on revenues of Rs 44,715 crore.

An email sent to the company did not elicit any response.

Vodafone Idea is also witnessing a flight of its high-paying, corporate customers, who are moving to Bharti Airtel and Reliance Jio as the quality of its network deteriorates. 

Analysts said the company lost 15 million customers in the June quarter to its rivals. This is in addition to the company losing close to 117 million customers in the year ended March 2020, reducing its subscriber base to 291 million.

The company's increasing losses and falling customer base are making its lenders jittery, as they have lent it close to Rs 1.2 trillion on a consolidated basis. Bankers said the liquidity profile of the company was expected to remain poor, with negative free cash flow from operations, significant AGR dues, and debt repayment obligations.

Vodafone Idea has to repay debt of about Rs 4,300 crore in the current fiscal year, which includes Department of Telecom dues. The company has availed of the moratorium of three months on payment of instalments (including principal and interest), due between March 1, 2020 and May 31, 2020, in accordance with the package announced by the RBI on March 27.