Vodafone Idea (Vi) continues to struggle with large debts while its future remains in doubt.
Amid the possible threat of bankruptcy, the Indian Government is reportedly against merging the struggling telco with state-owned operations, but could be close to extending the time to repay its spectrum dues. At the same time, some of the banks it owes money to are considering converting debt to equity to save the company.
Earlier this month, Kumar Mangalam Birla, chairman of the Aditya Birla Group conglomerate, has written to cabinet secretary Rajiv Gauba warning that Vodafone Idea is close to an “irretrievable point of collapse.”
In its Q2 earnings, the company said it had a gross debt (excluding lease liabilities) of Rs 1,803.1 billion (~$24 billion). It also owes billions of dollars to the Government after the Supreme Court of India last year gave Vi and Airtel 10 years to pay readjusted spectrum dues.
However, Vi has reportedly paid its entire license fees for the quarter ended June, but the company hasn’t detailed the amount paid or given details on the next installment.
The Indian government is also reportedly preparing a telecom relief package, doubling the adjusted gross revenue (AGR) dues payment timeframe from 10 to 20 years.
A Deutsche Bank report from July said the best option to save Vi was for the Indian Government to convert the telco’s debt into equity and merge it with state-run telco Bharat Sanchar Nigam Limited (BSNL).
However, the Times of India reports that the Government is against the merger of Vi with BSNL and/or Mahanagar Telephone Nigam Ltd (MTNL). The Times said there would be an “outright rejection” of the proposal.
The Government has reportedly rejected Birla’s proposal to hand over his stake and has stepped down as executive Chairman of Vi. Banks owed money by the telco are reportedly considering converting debt to equity and taking over the company.
Earlier this year it was reported the company – formed in 2018 after Vodafone India merged with Idea Cellular – was looking to sell its fixed-line broadband subsidiary, optic fiber unit and data center business in order to pay down its debts. The company was also said to be aiming to sell land banks that were bought for future data centers.
It then denied some of these reports – saying no offers were being considered by its board – but also said any sale of its data center assets would not be material enough to be disclosed to public investors.
In June Reliance Jio added 5.5 million subscribers to its network and Bharti Airtel added 3.8 million, while Vodafone Idea lost 4.3 million subscribers and declared a loss of $985.9 million for the quarter.
