Is Vodafone Idea headed for a financial crisis?

Is Vodafone Idea headed for a financial crisis?

Indian mobile provider Vodafone Idea (Vi) posted a loss of INR 6,985.1 crore (USD939.5 million) for the three months to end-March 2021 and raised concerns over its ability to service debt and pay adjusted gross revenue (AGR) and spectrum dues.

The company’s gross revenue declined 11.8 percent compared to December 2020 quarter.

Vi attributed the revenue decline in part to the abolition of the interconnection usage charge (IUC) from 1 January 2021, which it said accounted for the majority of the decline, with turnover dipping by just 3.3% when this factor is excluded.

Vodafone Idea’s net debt stood at INR 1.8 lakh crore ($24 billion) at the end of FY21. The company said that its inability to raise funds and the present financial condition has put a question mark on their ability to service debt and pay AGR and spectrum dues.

The company said, “The Company’s financial performance has impacted its ability to generate the cash flow that it needs to settle/ refinance its liabilities and guarantees as they fall due, which along with its financial condition is resulting in material uncertainty that casts significant doubt on the Company’s ability to make the payments mentioned therein and continue as a going concern.”

The financial services giant JP Morgan said Vodafone Idea remains challenged with the need for CAPEX acceleration for closing network gaps and a highly levered balance sheet.

Meanwhile, the cellco counted a total of 267.8 million wireless customers as of 31 March 2021, down from 269.8 million at end-December 2020 and 291.1 million at end-March 2020.

At the end of the quarter, the 4G subscriber base was 113.9 million (vs 109.7 million in Q3), an increase of 4.2 million in the quarter. The data volumes witnessed a healthy growth of 8.2% QoQ, driven by higher 4G additions.

Ravinder Takkar, MD & CEO, Vodafone Idea Limited, said “FY21 has been a transformational year for Vodafone Idea with several important milestones achieved including the launch of our unified brand “Vi”. In the year of the pandemic, when people and businesses were hugely dependent on telecom connectivity, we delivered superior network experience and improvement in several operating metrics supported by Vi GIGAnet, which remains the fastest 4G network in India, as per Ookla, as well as the network with highest rated voice quality as per TRAI. We enter FY22 with a renewed focus on executing our strategy to keep our customers ahead, and our cost optimization plan remains on track to deliver the targeted savings. We are in active discussion with potential investors for fundraising, to achieve our strategic intent.”

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