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Vodafone Idea Ltd.

BSE: 532822 Sector: Telecom
NSE: IDEA ISIN Code: INE669E01016
BSE 00:00 | 23 May 9.04 -0.10
(-1.09%)
OPEN

9.15

HIGH

9.25

LOW

9.00

NSE 00:00 | 23 May 9.05
(%)
OPEN

9.15

HIGH

9.25

LOW

9.00

OPEN 9.15
PREVIOUS CLOSE 9.14
VOLUME 41430420
52-Week high 16.79
52-Week low 4.55
P/E
Mkt Cap.(Rs cr) 29,035
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 9.15
CLOSE 9.14
VOLUME 41430420
52-Week high 16.79
52-Week low 4.55
P/E
Mkt Cap.(Rs cr) 29,035
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Vodafone Idea Ltd. (IDEA) - Director Report

Company director report

Dear Shareholders

We have pleasure in presenting the Twenty Sixth Annual Report togetherwith the audited financial statements of the Company for the Financial Year ended March31 2021.

Company Overview

Your Company a partnership between two strong promoters Aditya BirlaGroup and Vodafone Group is a major telecommunications operator in India offering voicedata enterprise services and other Value Added Services ("VAS")including Short Messaging Services Digital Services IoT etc. As of March 31 2021 thesubscriber base of your Company stands at 255.7 million (on VLR). The subscriber marketshare on VLR stands at 25.7% as of March 2021. The Wireless Revenue Market Share (RMS) onGross Revenue basis (GR) for your Company stands at 23.2% for the Financial Year 2021.

Your Company provides Voice and Data services on 2G 3G and 4Gtechnologies across all 22 service areas and has strong spectrum portfolio and networkfootprint to support the burgeoning demand for both data and voice. Your Company has alarge spectrum holding comprising 1768.4 MHz spectrum across 22 circles of which 1738.4MHz is liberalised spectrum which can be used towards deployment of any technology.

Your Company's mobile telecommunication services cover more than 1.2billion Indians. As of March 31 2021 your Company has 452650 broadband (3G+4G) sitesand all of the 4G sites are VoLTE enabled offering a better customer experience. YourCompany has also launched Voice over WiFi (VoWiFi) in several circles this year whichwill be expanded to rest of the country soon. The broadband network is spread over 331000towns and villages and covers more than a billion Indians. Your Company has been deployingDynamic Spectrum Re-farming (DSR) Massive MIMO and Small cells to maximize spectrumefficiency. Additionally your Company has been actively deploying LTE on TDD band of 2300MHz and 2500 MHz spectrum band to expand the capacity and on 900 MHz band to improvecustomer experience in dense areas. Your Company also derives revenue from carrying Indiainbound ILD traffic through arrangements with other mobile telecommunication companies andlong distance carriers operating outside India. Your Company has a portfolio of over~376000 km of Optical Fibre Cable (OFC) including own built and Indefeasible Right ofUse (IRU) OFC.

After successful completion of our network and IT consolidation inFY20 as the last leg of the integration journey your Company launched the new unifiedbrand 111 on September 07 2020. The new brand leverages on the legacy of two of the mostloved brands of the country - Ovodarc™ and which have brand saliency establishedover decades. Vi™ is built to be strong ever-dependable agile intuitive and abrand in tune with the needs of the customers in these ever-changing times. Your Companyalso launched GIGAnet - an integrated 4G network for its users. GIGAnet is theresult of the largest network integration completed in record time and one of the world'slargest DSR (Dynamic Spectrum Refarming) exercise. It has India's largest AI-poweredMassive MIMO sites along with largest deployment of universal cloud making it a 5G readynetwork.

Your Company's vision is to ‘Create world class digitalexperiences to connect and inspire every Indian to build a better tomorrow'. To achievethis end your Company is developing world-class infrastructure to introduce newer andsmarter technologies making both retail and enterprise customers future ready withinnovative offerings conveniently accessible through an eco-system of digital channels aswell as extensive on-ground presence.

Financial Results and Summary

The financial statements of the Company have been prepared inaccordance with the Indian Accounting Standards (Ind AS) notified under section 133 of theCompanies Act 2013 read with Companies (Accounts) Rules 2014.

The standalone and consolidated financial highlights of your Companyfor the Financial Year ended March 31 2021 are summarized as follows:

(in Rs Mn)

Particulars Standalone Consolidated
2020-21 2019-20 2020-21 2019-20
Income from sale of goods and services 416589 446830 419382 449167
Other Operating Income 138 320 140 408
Other Income 2584 10861 1742 10393
Total Revenue 419311 458011 421264 459968
Operating Expenses 252442 300976 250065 300450
EBITDA 166869 157035 171199 159518
Depreciation and Amortisation 229062 238888 236385 243564
EBIT (62193) (81853) (65186) (84046)
Interest and Finance charges 179916 153772 179981 153920
EBT (242109) (235625) (245167) (237966)
Exceptional Items (Net) (221036) (387242) (199681) (383557)
Share of JV/Associates - - 2314 3553
Profit / (Loss) Before Tax (463145) (622867) (442534) (617970)
Taxes (208) 108448 (203) 120811
Profit / (Loss) after Tax (462937) (731315) (442331) (738781)
Other Comprehensive Income net of tax (4152) (18242) 368 (90)
Total Comprehensive Income (467089) (749557) (441963) (738871)

Standalone revenue of your Company stood at Rs 416727 Mn a decreaseof 6.8% over previous year. The EBITDA stood at Rs 166869 Mn registering an increase of6.3% over the previous year. The Net Loss including amount specified in othercomprehensive income of the Company for the Financial Year March 31 2021 stood at Rs467088 Mn vis-a-vis Rs 749557 Mn for the previous year.

On a consolidated basis the revenue of your Company stood at Rs419522 Mn a decrease of 6.7% over the previous year. The EBITDA at Rs 171198 Mnreflects increase of 7.3% as compared to the previous year. The Consolidated Net Lossincluding amount specified in other comprehensive income of the Company stood at Rs441964 Mn for Financial Year

2019- 20 vis-a-vis Rs 738871 Mn for the previous year.

Operations Review

The Indian wireless industry continues to grapple with challenges ofhyper competition and unsustainable tariffs which were further aggravated by the COVID-19pandemic. The pandemic and the subsequent lockdowns continue to cause significantdisruption and slowdown of economic activities. Through these difficult and challengingtimes your Company has played a critical role in providing seamless connectivity tomillions of Indians. Vodafone Idea's high quality mobile network has formed the backboneto the digital infrastructure of the country as throughout the pandemic severalbusinesses and corporations shifted to virtual workspaces and friends and familiesconnected online. Your Company also extended support to its marginalized customers whowere the most severely affected through validity extension free talktime and othermeans. As the second wave continues to wreak havoc your Company remains committed inproviding uninterrupted services to all Indians in this difficult time while ensuringexceptional quality of services. After extending free validity and talktime in the firstwave to the marginalized customers your Company again offered special relief packageduring the severe second wave of the pandemic to low income users offering free validityand talktime.

While the operating environment continues to remain challengingincreasing digital penetration which has got a further boost during the pandemic remainsa massive opportunity for telecom industry especially when the pricing revives in future.Increasing content consumption especially through video and social media usage isdriving strong demand for high speed internet and all the telecom operators with theirmassive network investments are well placed to benefit from this trend. During FinancialYear

2020- 21 wireless broadband penetration continued to improve supportedby growing work-from-home culture and businesses moving online. Wireless broadbandsubscriber base was 755.4 million (broadband penetration ~64.0%) as of March 2021compared to 668.3 million (broadband penetration ~57.7%) as of March 2020. During theyear TRAI has also abolished the domestic interconnect regime and moved to Bill &Keep starting January 1 2021.

Your Company has successfully completed the integration exercise andfully realized the targeted synergies at a record pace in comparison with any globalmergers especially given the size scale and complexity of the integration. The fivepillar strategy which acted as a compass to navigate the critical phase of integrationcontinues to guide your Company going forward. As a natural progression or evolution ofthe strategy below are the ongoing major strategic initiatives to improve your Company'srevenue and profitability as well as to strengthen its overall position in the market:

1. Focused network investments for superior customer experience -Your Company continues to have a focused approach to investments biased towards theprofitable areas to utilize capex effectively while ensuring that it offers superiorcustomer experience in these areas. Your Company has been driving incremental 4Ginvestments in the 16 priority circles which contribute 94% of Vi revenue and 86% ofindustry revenue. Your Company also has been adding 4G capacity through spectrum refarmingin these areas. Your Company has been deploying several 5G ready technologies such asMassive MIMO DSR Cloudification of Core which are central to its future growthstrategy. Your Company has also initiated 5G trials with major network partners.

2. Market initiatives to drive ARPU improvement -

While tariff hikes remain crucial to improve the overall industryhealth your Company has undertaken several market initiatives to improve ARPU by driving4G/UL penetration. As a part of the customer excellence drive your Company has beentransforming customer servicing across all touchpoints with a clear focus towards shift todigital. Further as part of its digital- first approach your Company has renewed itsfocus on digitalization of distribution channel to completely automate sales processcreating seamless and efficient journey for the channel partners.

3. Focusing on Business Services and Fast-Growing Revenue Segments -Business services remains one of the key focus areas where your Company leverages itsmulti-year relationships with customers and global strength of Vodafone group. Vi Businesscontinues to deliver growth by partnering both large enterprises and

SMBs in their digital transformation programs which have gotaccelerated during the pandemic. In new business streams cloud services remains centralto the growth strategy. Your Company continues to maintain strong positioning in IoTofferings which has a potential to grow manifold in the near future.

4. Driving partnerships and digital revenue streams - Your Companycontinues to focus on its platform capabilities to offer deeper integration with itspartners for a differentiated experience create monetization opportunities and trulybecome an integrated digital service provider. On content your Company's strategy hasalways been to partner "best in class" across global and regional contentaggregators. Further the tie-ups with e-commerce platforms handset manufacturersfinancial institutions NBFCs among many others will drive value not only for thecustomers but also for your Company and its partners.

5. Cost optimization to drive organizational efficiency - Aftersuccessfully achieving targeted merger opex synergies of Rs 84 billion your Company hasundertaken the cost optimization exercise across the organization in line with theevolving industry structure and business model. Your Company targets to achieve Rs 40billion of annualized cost savings by end of calendar year 2021. Through severalinitiatives your Company has already achieved ~65% of the targeted annualised savings ona run-rate basis by the end of FY21.

Your Company has thus been making significant progress on variousstrategic initiatives and continues to strive towards transforming from a pure play mobileoperator to a truly integrated digital service provider.

Dividend

As your Company has incurred net loss during the Financial Year2020-21 your Directors have not recommended any dividend for the year.

Transfer to Reserves

During the Financial Year under review the Board has not proposed totransfer any amount to Reserves.

Changes in Share Capital

During the year under review there was no fresh issue of capital bythe Company. The issued subscribed and paid-up equity share capital of your Company as onMarch 31 2021 stood at Rs 287354 Mn comprising of 28735389240 Equity Shares of Rs10/- each.

Finance

On a standalone basis the Company had Cash and Cash Equivalents of Rs2402 Mn and Fixed Deposits with banks having maturity of 3 to 12 months of Rs 2 Mn as onMarch 31 2021. The Company's net debt as on March 31 2021 increased by Rs 674525 Mn toRs 1801429 Mn as compared to Rs 1126904 Mn last year.

On a consolidated basis the Company had Cash and Cash Equivalents ofRs 3503 Mn and Fixed Deposits with banks having maturity of 3 to 12 months of Rs 27 Mn ason March 31 2021. The Company's net debt as on March 31 2021 increased by Rs 674378 Mnto Rs 1799573 Mn as compared to Rs 1125195 Mn last year.

The Department of Telecommunications (DoT) had provided an option fordeferment of payment of spectrum auction installments due for payment during the FinancialYears 2020-21 and 2021-22. We have opted for deferment of instalments due during thesefinancial years due to which there have been no instalment payments to DoT in FinancialYear 2020-21.

During the year the Company had opted for moratorium on interest andprincipal payments on rupee term loans from banks pursuant to the RBI notifications datedMarch 27 2020 and May 23 2020 permitting inter-alia banks to grant a moratorium of sixmonths to each borrower in respect to interest and principal payments falling due betweenMarch 1 2020 and August 31 2020. All amounts covered under the moratorium have beensubsequently paid in full except as follows:

(i) In respect one of the term loans the lender had granted an optionof converting the interest accrued during moratorium period as principal. The Companyavailed this option due to which interest amounting to Rs 2143 Mn has been capitalizedand will be repaid alongwith the last installment.

(ii) In respect to another term loan principal payment of Rs 625 Mnwas due for payment on June 30 2020. The lender has granted deferment of the entire loanrepayment schedule by 3 months and accordingly the amount due on June 30 2020 was repaidon September 30 2020.

All other scheduled loan repayments were made on respective due dates.

Credit Rating

During the Financial Year 2020-21 CARE downgraded the Company's ratingwith respect to Long Term Bank Facilities and certain Non-Convertible Debentures to‘CARE B+/Credit

Watch with negative implications' (previous year end rating ‘CAREBB- / Credit Watch with negative implications'). Further Brickwork Ratings has withdrawnthe rating watch with respect to certain Non-Convertible Debentures amounting to Rs 25000Mn to ‘BWR BB-/Stable' (previous year end ‘BWR BB-/Credit Watch with negativeimplications'). Consequent to full repayment of Non-Convertible Debentures due on July 102020 the credit ratings issued on these instruments by CRISIL and India Ratings have beenwithdrawn.

On 21st July 2021 Brickworks has revised the outlook with respect tocertain Non-Convertible Debentures amounting to Rs 25000 Mn from BWR BB- (Stable) to BWRBB- (Negative).

On 13th August 2021 CARE has further downgraded the Company's ratingwith respect to Long Term Bank Facilities and Non-Convertible Debentures to CARE B-(Credit Watch with Negative Implications).

Capital Expenditure

On a standalone basis the capital expenditure (including capitaladvances and excluding RoU assets and Spectrum) incurred was Rs 36244 Mn in the FinancialYear 2020-21. Further to the above the Company has incurred Rs 3552 Mn towards Bandwidthand Rs 5747 Mn paid towards the upfront payment for the unassigned spectrum.

On a consolidated basis the capital expenditure (including capitaladvances and excluding RoU assets and Spectrum) incurred was Rs 37981 Mn in the FinancialYear 2020-21. Further to the above the Company has incurred Rs 3552 Mn towards Bandwidthand Rs 5747 Mn paid towards the upfront payment for the unassigned spectrum.

Fixed Deposits

Your Company has not accepted any fixed deposits and as such noamount of principal or interest was outstanding as on the date of the Balance Sheet.

Significant Developments • Spectrum Auction - March 2021

Your Company participated in Spectrum Auction conducted by Departmentof Telecommunications (DoT) in March 2021 and acquired 23.6 MHz of spectrum across 900and 1800 MHz in Tamil Nadu Karnataka Uttar Pradesh (East) Uttar Pradesh (West) andWest Bengal at an aggregate value of Rs 19.93 billion. Your Company has also optimizedspectrum holding in some of the circles. Post March 2021 spectrum auction your Company'soverall spectrum holding is 1768.4 MHz across different frequency bands out of which1738.4 MHz spectrum is liberalised and can be used towards deployment of any technology(2G 3G 4G or 5G).

• Amalgamation of Indus Towers Limited with Bharti InfratelLimited

Indus Towers Ltd. (Indus) was a joint venture between the CompanyBharti Infratel Ltd. (Bharti Infratel) and Vodafone Group and the Company held 11.15%stake in Indus. On April 25 2018 the merger of Bharti Infratel and Indus Towers wasannounced to create a listed Pan-India Tower Company. On November 19 2020 the merger ofIndus and Bharti Infratel was completed. The Company has sold its 11.15% stake in Indus oncompletion of the merger for a cash consideration of Rs 37642 Mn in accordance with theterms of agreement. Out of the consideration received from Bharti Infratel the Companyhas made a prepayment of Rs 24000 Mn to the merged tower entity which was fully adjustedin line with terms of the agreement.

• AGR Matter

The Hon'ble Supreme Court on October 24 2019 along with supplementaryorder dated July 20 2020 and final order dated September 1 2020 delivered its judgment(together referred to as "AGR Judgment") upholding the view considered byDepartment of Telecommunications ("DoT") in respect of the definition ofAdjusted Gross Revenue ("AGR") ("AGR Judgment"). The order upheld theprincipal demand levy of interest penalty and interest on penalty. This AGR Judgment hassignificant financial implications on the Company.

On July 20 2020 the Hon'ble Supreme Court after hearing all partiesobserved that the amount to be recovered (preliminary assessed) given by DoT in itsmodification application are taken to be as final amount and there can be no disputeraised about it. The Company during the year paid further sum of Rs 10000 Mn andaccordingly the total payment as at March 31 2021 (including the payment of Rs 68544 Mnpaid during year ended March 31 2020) towards the dues following this AGR Judgment standsat Rs 78544 Mn.

Subsequent to the same the Hon'ble Supreme Court vide its final orderdated September 1 2020 has inter-alia directed that for the demand raised by the DoT inrespect of the AGR dues based on the judgment of this Court there shall not be anydispute raised by any of the Telecom Operators and that there shall not be anyreassessment; the Telecom Operators shall at the first instance make the payment of 10%of the total dues as demanded by DoT by March 31 2021 and thereafter Telecom Operatorsto make payment in yearly instalments commencing from April 1 2021 to March 31 2031payable by 31st March of every succeeding financial year. As the cumulative amount paid bythe Company exceeded 10% of the total liability which it believes is as demanded by DoTfor the period upto the date of judgment the next instalment would be payable only by31st March 2022. Accordingly the Company has informed DoT that it has paid more than 10%of the total dues and has complied with the Hon'ble Supreme Court order. The Company hasalso filed affidavit with the Hon'ble Supreme Court order confirming payment of 10% of thetotal dues with an undertaking to pay arrears as per the court judgment.

Further on January 7 2021 the Company had approached Hon'ble SupremeCourt requesting them to allow DoT to correct manifest/clerical/arithmetic errors in thecomputation of AGR demands and carry out the corrections in accordance with law within areasonable period of time. The Supreme Court vide its order dated July 23 2021 rejectedthe application filed by the Company and other operators. Subsequently on August 102021 the Company has filed a review petition against the order dated July 23 2021 whichis pending for outcome. Meanwhile DoT issued additional demands for which the Company haswritten to them requesting corrections of certain computational errors admissiblepass-through not considered based on the principles laid down in the AGR judgement.

• One-time Spectrum Charge Matter

In respect of levy of One Time Spectrum Charge (‘OTSC') the DoThas raised demand on the Company and erstwhile Vodafone India Limited (VInl) and VodafoneMobile Services Limited (VMSL) in January 2013 for spectrum beyond 6.2 MHz in respectiveservice areas for retrospective period from July 1 2008 to December 31 2012 and forspectrum beyond 4.4 MHz in respective service areas effective January 1 2013 till expiryof the period as per respective licenses. In the opinion of the Company the above demandamounts to alteration of financial terms of the licenses issued in the past and thereforethe Company filed a petition in the Hon'ble High Court of Bombay which vide its orderdated January 28 2013 had directed the DoT to respond and not to take any coerciveaction until the next date of hearing. Similarly erstwhile VInl and VMSL had filed apetition before the Hon'ble TDSAT. Hon'ble TDSAT vide its order dated July 4 2019 heldthat for spectrum below 6.2 MHz OTSC is not chargeable and accordingly demand is setaside. For spectrum beyond 6.2 MHz if spectrum is allotted after July 01 2008 OTSCshall be levied from the date of allotment of such spectrum and if spectrum is allottedbefore July 01 2008 OTSC shall be levied from January 01 2013 till the date of expiryof licenses and ordered DoT to issue revised demands if any as per terms of directiongiven. The Company filed an appeal before the Hon'ble Supreme Court against the Order ofthe TDSAT. On March 16 2020 the Hon'ble Supreme Court dismissed the appeal of theCompany and did not interfere with the TDSAT judgement. The DoT's appeal against the saidTDSAT Order for the levy on Spectrum below 6.2 MHz is pending.

Brand Overview

Your Company launched (on September 7 2020) a new & unified brand

.