Vodafone-Idea (VIL), in its review petition filed in the Supreme Court against the recent order on adjusted gross revenue, has made it clear that the impact of the judgment is so “devastating” that telecom companies like them are on the “brink of financial insolvency” and the net worth of the company is “drastically depleting.”
Bringing to the notice of the court that the company has not made any “undue profits” or taken advantage of the shift to the revenue share regime, VIL has in its petition said that its promoters, which include Vodafone, the Aditya Birla group, and public shareholders, have invested more than Rs 1.90 trillion, of which Rs 1.65 trillion was bought as foreign direct investment, but it is facing stress now. It points out in its petition that the investment in the company including the shareholders’ contribution, borrowing from banks, and deferred payment liabilities to date, is more than Rs 3.104 trillion.
Yet it points out the cumulative loss generated by the company from operations for the last 10 years from operations (including from operations of the erstwhile Vodafone licensed entities which have merged with the company in FY 18-19) has been a sizeable Rs 55,175 crore. This it says is before factoring the impact of the judgement under review which based on their calculations comes to Rs 44,150 crore or $6.3 billion at current exchange rate.
VIL recently submitted a petition for a review of the SC judgement which has imposed over Rs 1.47 trillion as dues which telcos collectively have to pay for AGR as well as spectrum user charges dues to the department pf telecommunications. Bharti Airtel, Telenor and Videocon have also fled review petitions. The dues imposed on VIL is the highest amongst the telcos.
And its warning in the petition that it could well be close to financial insolvency comes close on the heels of Vodafone plc CEO Nick Read saying that the Indian JV is headed towards liquidation, only to withdraw the statement a day later.
In its petition, VIL says that that it has already paid Rs 59,467 crore as spectrum fees to the government to date, out of a total of Rs 1.39 trillion which it has to pay. The balance of Rs 89,180 crore will be paid by VIL which include interest in various instalments till 2034.
The petition highlights the crises by saying that the net worth of the company is drastically depleting. There is a debt due to nationalised and other Indian banks as well as bondholders in excess of Rs 24,500 crore as on September 30, 2019. It argues that the the fact that the revenues of the company as well as the industry have drastically fallen in view of competition in as much currently it is only 13 paisa per minute vis-a-vis Rs 2 a minute in 2007-8, clearly shows that there is now hardly the size of revenue to sustain operations and spectrum cost of this scale.
VIL also based on its calculations says that the total impact of the judgement on telcos would be to the tune of Rs 1.80 trillion far higher than what analysts have calculated. The firm also has calculated that the total amount which has to be forked out by non telcos which also have a licence would be to the tune of Rs 3 trillion, much higher than the assessment of Bharti which has in its submission said it would be to the tune of Rs 2.27 trillion.