Homepage > For Voda Idea, the long term looks still cloudy: experts

For Voda Idea, the long term looks still cloudy: experts

According to industry experts, the long-awaited telecom package is unlikely to bail out struggling telecom company Vodafone Idea in the long term.

Experts said the reforms are primarily procedural, although some benefits will go to stronger players, including Airtel and Reliance Jio.

Even with the government’s four-year moratorium on the payment of annual dues stemming from the AGR ruling and spectrum auctions, experts believe that Vodafone’s demise has only been delayed by a few years. Industry veterans believe that Vi is unlikely to still be able to pay her AGR dues after the moratorium is over, as the way forward to generate enough income to pay AGR dues with interest, four years later will be difficult. .

Proposed reforms

The government has proposed a total of nine structural reforms and five process reforms, the main reform of which is the four-year moratorium on annual AGR and spectrum payments. This will bring immediate relief and lead to an influx of cash into the struggling industry to invest in the next wave of 5G and further improve the 4G network.

However, the net present value on the amounts owed will be protected by charging an MCLR plus two interest rates on the moratorium amount.

“Since the government wanted the plan to be NPV neutral, that just pushes the box further down the road. So what is supposed to represent 24,000 crore of annual spectrum and AGR payments for Vi, will now be 37,000 crore per year in four years, ”said one expert. Activity area under conditions of anonymity.

According to the expert, paying high contributions to the government, investing in new technologies and participating in auctions will be extremely difficult for Vodafone even in the future.

Sanjay Kapoor, former CEO of Bharti Airtel, also shares this view.

“The government has declared this program to be NPV neutral. Although NPV neutrality only works if Vodafone survives, as the government is most exposed to its debts. The current package won’t necessarily save Vi from the existing mess. Kapoor said.

According to Kapoor, Vodafone faces an uphill tax battle, with past payments haunting the phone company even with the moratorium.

“Their EBITDA at 5,500 crore does not cover their capital expenditure, their debts to government and other agencies, they have to repay their NCBs, they have to renew their bank guarantees worth 12,000 crore in the future. close, which their current EBITDA cannot support. If their past is not addressed, their future will always remain a big question mark. “

Lots of problems for Voda

Due to its financial problems, Vodafone Idea is already in a bad position compared to other telecommunications operators. Having relatively poor network quality, losing subscribers and very late in investing in the 5G race. Experts believe that given Vodafone’s current problems, it is unlikely to be able to compete sufficiently with other telecom operators, even with the influx of cash given the moratorium. Therefore, it remains uncertain whether Vi will be able to repay the government 4 years later.

An anonymous source said Activity area that Vi’s revenue will need to be multiplied by 2.5 from their current amount and that their EBITDA will need to be multiplied by seven over the next four years to survive.

In a press release, Kumar Mangalam Birla, chairman of the Aditya Birla group and former chairman of Vodafone Idea, said: “The innovative reforms announced by the government today will go a long way in unlocking the telecommunications sector. These reforms demonstrate the government’s firm commitment to ensuring healthy growth in the industry.

Nick Read, CEO of Vodafone Group, added: “Although the sector has been struggling for many years, we expect the constructive initiative from the government announced today, as well as the strong and continued support from the Minister. of Telecoms and the Minister of Finance, will mark the start of a new era for India’s digital ambitions and for Vi’s continued contribution to the creation of an inclusive and sustainable digital society for the benefit of all citizens ”

Similar Posts:

Leave A Reply

Please enter your comment!
Please enter your name here

Stay on Top - Get the daily news in your inbox

Recent Articles

Most Popurlar

Trending this Week

Similar Posts: