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Hope Govt Offers Support To Sector Amid Duress; Even Interim Floor Price Can Help: VIL CEO

The company's plea is that the telecom department should be allowed to fix the arithmetic errors that have crept in.

Photo Credit : Shutterstock


Crisis-hit Vodafone Idea on Monday said it is hopeful that the government will offer the necessary support to address structural issues in the sector and emphasised that floor pricing, even in an interim manner, could help matters.

Vodafone Idea CEO Ravinder Takkar, speaking at the Q1 earnings call, said the review petition filed recently by the company -- after the Supreme Court dismissed its plea for rectification of the alleged errors in the calculation of adjusted gross revenue (AGR) related dues -- is not intended to challenge the AGR definition or relitigate that matter.

The company's plea is that the telecom department should be allowed to fix the arithmetic errors that have crept in.

'I just find it very compelling, that there is no reason why in our country we should have this type of situation where we are asked to pay many times over for something we have already paid for.

“So, I am very hopeful that in this review petition, we can explain to the court, because their point earlier was that somehow we are challenging the original verdict that is not our intent. Hopefully, that clarity can be provided,' he told analysts.

To a specific query, Takkar noted that options exist if the review petition gets rejected, as the company has the ability to file a curative petition.

'...if somehow this review petition gets rejected, then we do have the ability to file a curative petition, which goes in front of a slightly different bench and we can make that case. I hope it doesn't have to come to that, but if we have to take that step, then certainly we intend to do so,' he said.

Takkar emphasised that tariff hikes and floor price fixation are 'really important' and added there is 'no way' the stress in the industry and the overall health of the industry can be improved until these things are solved.

He said ARPU (Average Revenue Per User) improvement is imperative for the industry to survive and remain healthy, and noted that floor pricing 'is the best way to do that'.

'Because the discipline that is required to maintain healthy pricing, unfortunately in our industry has never really been stuck to. So, I think floor pricing is the right way to do it,' Takkar said.

He contended that the floor pricing need not be a long term measure.

'It doesn't have to be a permanent thing. It can be done in an interim manner for a couple of years, and it can be looked at... if the health becomes good and there is a disciple in the industry, there is no reason why floor pricing cannot be taken off at that point,' Takkar suggested.

Stating that the VIL family was passing through a difficult phase, Takkar said he firmly believes that the government recognises the criticality of the sector.

'As the industry continues to remain under unsustainable financial duress, we remain hopeful that the Government will provide the necessary support to address structural issues faced by the sector, and can enable operators to generate returns on their investment,' he said.

While recent certain tariff tweaks undertaken by VIL are steps in the right direction, the company believes that such changes are not material enough to solve structural issues of the industry, and tariff hikes and floor pricing remain critical for the sector revival.

Takkar further said that although Kumar Mangalam Birla recently stepped down as chairman of Vodafone Idea, 'he as well as Aditya Birla Group (ABG) and the Vodafone group are committing to providing support and guidance to the company, in line with the stated positions of both the groups'.

'We will thus continue to get the benefit of their experience and support,' Takkar said.

On fundraising, Takkar maintained that VIL continues to remain in active discussions with potential investors.

The company continues to engage with the regulator on floor pricing which is 'critical and necessary' to improve the overall health of the industry, he observed.

'As mentioned by us, time and again, tariff hike remains a critical factor to revive the sector, and pricing structure has to change, where operators have the ability to charge customers for incremental usage,' he pointed out.

Vodafone Idea will be launching a music streaming service in partnership with a leading content provider that will be available to prepaid and postpaid consumers, he informed.

Vodafone Idea management's commentary post Q1 results come at a time when the telco is struggling to stay afloat.

The total gross debt (excluding lease liabilities and including interest accrued but not due) as of June 30, 2021, of VIL, stood at Rs 1,91,590 crore, comprising of deferred spectrum payment obligations of Rs 1,06,010 crore and AGR liability of Rs 62,180 crore that are due to the government.

The debt-ridden VIL posted a lower consolidated loss of Rs 7,319 crore for the first quarter ended June 30, 2021, against a Rs 25,460 crore loss in the same quarter a year ago.

Recently, billionaire Kumar Mangalam Birla stepped down as chairman of Vodafone Idea Ltd, within two months of offering to hand over Aditya Birla Group's stake in the debt-laden telco to the government in a bid to avert a crisis for the telecom company.

Vodafone Idea has now filed a review petition in the Supreme Court after it recently dismissed its plea for rectification of the alleged errors in the calculation of adjusted gross revenue (AGR) related dues.

In its review petition, VIL has said it is 'a travesty of justice' that the company is restrained from questioning the arithmetical errors/omission, which is going to cost it about Rs 25,000 crore (Rs 5,932 crore of principal plus interest, penalty and interest on penalty).

The Vodafone Idea petition has said that its contentions have been rejected by the order under review and this denial could result in the company going under and its about 27.3 crore subscribers being left 'high and dry'.


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