India’s ailing mobile carriers will be allowed to delay paying billions of dollars in spectrum and licensing fees, the government said Wednesday, with Vodafone’s struggling local unit in dire need of the relief.
Shares in Vi (Vodafone Idea) — a joint venture of Britain’s Vodafone Group and India’s Idea Cellular — fell sharply in August after reports its billionaire chairman thought the firm was on the brink of collapse and wanted to sell his stake.
Vodafone, Bharti Airtel and other operators have been struggling to compete ever since the 2016 launch of Reliance Jio owned by Asia’s richest man Mukesh Ambani, which promised dirt-cheap internet and free calls, sparking a brutal price war.
“A four-year moratorium on the payment of dues by telecom service providers has been approved,” Communications Minister Ashwini Vaishnav told reporters.
“This decision will end cash-flow stress in the industry.”
The Supreme Court last year ordered India’s top telcos to pay $13 billion in unpaid spectrum and licensing fees, with Vi and Airtel then estimated to have to stump up at least $3 billion.
But analysts said the measure would do little to help reduce debt at Vi, which reported total liabilities of 1.9 trillion rupees ($25.8 billion) at the end of June 2021.
“It’s a relief but not a lifesaver because of (Vi’s) weak business profile,” Fitch Ratings senior director, Nitin Soni, told AFP.
“It’s unlikely to salvage the company’s competitive position.”
Vi has been steadily losing subscribers in recent months, with over four million customers exiting the network in June, according to data from the Telecom Regulatory Authority of India.
With a market share of 23 percent in June 2021, Vi now lags behind Airtel and Reliance Jio in the competitive Indian market of 1.3 billion people.
Last month, the firm reported a net loss of 73.19 billion rupees for the quarter ending June 30.
The company has been unable to meet its fundraising target of 250 billion rupees announced last year, with investors reluctant to lend to the cash-strapped firm.
The announced moratorium will help Vi defer annual payments of between 240 to 320 billion rupees, according to analysts. The telcos are still expected to pay interest on the dues.
Vi shares closed nine percent higher on Wednesday ahead of the announcement, with expectations that relief measures for the sector were imminent. (AFP)