Vodafone Idea in talks to refinance over Rs 6,000 crore of its debt

Fall in 4G customers is a concern as Airtel continues to increase its share

Vodafone Idea (Vi) is in discussion with bond holders to refinance over Rs 6,000 crore of debt that is due in the next four-six months, the company said in an analyst call on Monday.

The telecom company’s operational performance has been affected by intense competition, low tariffs, and a debt of Rs 1.9 trillion, leaving it with little surplus for a network upgrade. Its plans to raise Rs 25,000 crore from investors too have not fructified.

While the Vi management is hoping for a favourable decision from the government on floor tariffs, it is working to raise cash and save interest costs. “We are generating positive cash from our operations, which enables us to meet our capex requirements, interest payments, and smaller principal payments. We have lumpy redemptions from December 2021 to February 2022, for which we are working on two fronts. First, we are engaged with investors to get new funding and, second, we are in discussion with bond holders to see refinancing possibilities,” said Chief Financial Officer Akshaya Moondra on the call.

He added the company had received Rs 1,000 crore in the form of income tax refund in the June quarter and expected to receive a significant part of the remaining Rs 5,800 crore within the year. Vi narrowed its net loss by 71 per cent to Rs 7,319 crore in the first quarter of FY22 on a year-on-year basis on account of lower exceptional expenses.

In the same period last year, it had posted a net loss of Rs 25,460 crore due to provisioning for adjusted gross revenues. On a sequential basis, however, it was a weak showing and the loss widened from Rs 7,022 crore due to lower revenues.

PLANNING AHEAD

• Vodafone Idea has Rs 6,000 cr of loan repayment due between December and February
• It will continue with network investments in 16 key circles to effectively utilise capex 
• The firm is progressively hiking 2G tariffs. It hopes for a favourable decision from the govt on the issue of floor price
• The firm has lost 12.4 million subscribers in Q1FY22, including 1 million 4G subscribers

However, analysts have raised concern at its falling subscriber base, which shrunk by 12.4 million to 255.4 million in the June-end quarter. Worse, after a steady increase quarter-on-quarter in its 4G customer base, the trend has been reversed. Vi’s 4G subscriber base fell by 1 million in the first quarter of FY22 to 113 million over the previous quarter. The hope for the company was that even while its 2G subscriber base was falling sharply, quarter on quarter, its 4G customers were holding firm (they help in increasing average revenue per user, or ARPUs) and it increased from 105 million in the first quarter of FY21, hitting 114 million in the fourth quarter of FY21.

Also its broadband subscriber base (3G and 4G) has also shrunk from 123.6 million in the fourth quarter of FY21 to 121.4 million in the reporting quarter. The concern has a basis as rival Bharti Airtel (which also has a legacy network of 2G subscribers) has ensured that it is able to move more and more of its 2G customers to 4G and push up ARPUs. And it has succeeded in doing so. Its 4G subscriber base went up from 280 million in the first quarter FY21 to 321 million in Q1 of FY22.

Not only that, its 4G subscriber base went up from 179 million in the fourth quarter of FY21 to 184 million in the first quarter of FY22. As a result, over 57 per cent of its customers are now on 4G against 44 per cent of Vi.

Vi Managing Director and CEO Ravinder Takkar blamed the subscriber loss to the second wave of the pandemic and added that the 4G customer base remained stable with a decline of around a million users. He said that customer engagement and the quality of the network remained good, resulting in high usage by its 4G customers.

Responding to a query on plans to increase its 4G coverage, Takkar said it has been unable to do it due to fund raising delay.