Vodafone Idea, one of the top three telecom players in the country, warned that it will be able to continue as ‘a going concern’ only if it is able to obtain relief from the government.
Going concern refers to a company that has the ability to continue to operate and does not face the threat of a shutdown due to a lack of cash.
“The Company, through Cellular Operators Association of India (COAI), has made representations to the Government to provide relief to the telecom sector, including but not limited to requesting to not press for the AGR liability payment and grant waivers, not levy Spectrum Usage Charges on non-licensed revenue / income, reduction of License fee and SUC rates, use of GST credit for payment of Government levies and allow payment to be made in installments after some moratorium and grant a moratorium of two years for the payment of Spectrum dues beyond April 01, 2020 up to March 31, 2022. The Government has also taken cognizance of the financial stress on the telecom sector and has recently set-up a Committee of Secretaries (‘COS’) to evaluate the telecom operators’ plea and suggest measures to mitigate the financial stress.
“It is to be noted that our ability to continue as going concern is dependent on obtaining the reliefs from the Government as discussed above and positive outcome of the proposed legal remedy,” Vodafone Idea said on the occasion of detailing its second quarter financial performance today.
The disclosure came shortly after it posted a whopping Rs 50,922 cr loss for the three months ended September. The loss was on account of three extraordinary factors related to a recent Supreme Court judgement that said that telecom companies have to pay revenue shares on their entire revenue, and not just on the component derived from their ‘licensed activities’.
The company took a charge of Rs 25,680 cr during the quarter as a provision towards the payment of Rs 44,000 cr of liabilities arising out of the Supreme Court judgment.
It also said it no longer expects to get tax benefits of Rs 13,940 cr that it had expected and accounted for. This amount, therefore, was added back to its expense table for the September quarter.
Finally, it also wrote off Rs 4,030 cr worth of equipment and other assets related to its 3G network, as it has now decided to divert much of its 3G spectrum towards its 4G network.
CHANGE OF PLANS
Besides the 3G network plan, the company also announced certain other changes to its roadmap.
It said it has reduced the planned footprint of its 4G network by eliminating “non-priority” areas from the same. Primarily because of this, it said it would be spending only Rs 13,000 cr as capital expenses — mostly network rollout — in the current financial year, against the earlier estimate of Rs 17,000 cr.
The company continued to lose subscribers during the quarter, hitting the 31.11 cr mark, down from 32.00 cr three months earlier.
“We continue to invest in 4G to increase coverage and capacity,” the company said.
During the quarter it added 12,000 4G FDD sites aimed at increasing coverage, and 6,000 4G TDD sites aimed at reducing congestion.
Overall broadband site count stood at 405,346 in Q2 compared to 392,747 in Q1FY20.
Vodafone Idea added 5.5 million new 4G customers during the three months, compared to 8 million added by Airtel over the same period.
It had 90.3 million 4G subscribers at the end of September, compared to 103.11 million for Airtel.
Total data volumes grew by 8.4% on quarter to 3,492 billion MB, compared to a 15.2% growth reported by Airtel.