Vodafone top brass seeks 2-year moratorium on deferred spectrum payment

With the telecom sector reeling under acute financial stress, Vodafone Group Chairman Gerard Kleisterlee and CEO Nick Read on Monday met Telecom Secretary Anshu Prakash, as the company sought a two-year moratorium on deferred spectrum payments, and other relief measures.

Vodafone Group officials also met Commerce and Industry Minister Piyush Goyal during the day.

Speaking to reporters after a meeting with the telecom secretary, Kleisterlee said the British telecom giant -- which is invested in the Indian telecom services market through Vodafone Idea -- had "good discussions as always" with the government.

Asked about the speculations in the market that the company may not remain a long-term investor in India given the sectoral stress, Read asserted, "We are absolutely focused on the successful integration of our business between Vodafone and Idea."

Industry sources told PTI that demand for two-year moratorium on payment of spectrum bought in the past auctions, as well as the long-standing issue of GST input tax credit locked up with the government, also figured during the discussions on Monday.

The telecom sector has been battered by falling tariffs, eroding profitability, and mounting debt, in the face of stiff competition triggered by disruptive offerings of Reliance Jio, owned by Mukesh Ambani.

The industry has been seeking urgent relief measures for the troubled sector, entailing cut in levies like licence fee and spectrum charges, and release of GST input tax credit locked up with the government.

Billionaire Kumar Mangalam Birla, head of Vodafone Idea, had sent an SOS to the government earlier also for deferring statutory payments in a sector that was not generating enough cash to even service loans. Vodafone Idea has been seeking two-year moratorium on its annual spectrum payment citing debt and stress on balance sheet.

Vodafone and Idea participated in five spectrum auctions in 2010, 2012, 2014, 2015 and 2016 before merging their businesses in August 2018. In the auctions, Vodafone acquired spectrum worth Rs 79,343 crore: the highest in terms of value compared to bids made by other operators. Idea purchased spectrum worth Rs 63,597 crore in the auctions.

Industry observers note that Vodafone Idea has also lost substantial ground in the market over the past one year. The merger of the India unit of Vodafone Group and Idea Cellular was completed on August 31, 2018, and shares of Vodafone Idea that hovered at almost Rs 31 apiece on September 3, 2018, are now down at Rs 6.16 apiece (On Monday it ended 9.03 per cent higher than Friday's close).

Vodafone Idea's consolidated losses for the June 2019 quarter stood at Rs 4,873.9 crore.

Adding to its woes, the telecom department's apex decision-making body, Digital Communications Commission recently approved imposing a cumulative penalty of Rs 3,050 crore on Bharti Airtel and Vodafone Idea for not providing sufficient points of interconnection to Reliance Jio at the time of launch of services in 2016.

The penalty on Airtel and Vodafone worked out to be about Rs 1,050 crore each. In the case of Idea, it comes to about Rs 950 crore.

Amid intense competition in the telecom sector eroding market share and subscriber base of the company, Vodafone Idea, in August this year, announced that its CEO Balesh Sharma has stepped down due to "personal reasons". The company had accepted Sharma's resignation and replaced him with the representative of Vodafone Group, Ravinder Takkar.