Vodafone Idea eyes external equity funding by year-end
Debt-ridden Vodafone Idea may reportedly close its external equity funding by the end of this year. Akshaya Moondra, the chief executive of the cash-strapped telecom during the earning call said the talks for equity funding have picked up momentum and he anticipated that they may see a positive outcome in the coming quarters.
The funding is crucial for the telco as it has not posted any profit since the 2018 merger (Vodafone India and Idea Cellular). The company has constantly been losing its subscribers to Reliance Jio and Bharti Airtel.
Through this funding, Vi will be able to raise debt from a consortium of banks.
Meanwhile, on Monday, the telco received funding assurance of up to ₹2,000 crore from a promoter group entity, Vodafone Idea informed about this development in a regulatory filing.
"The company has received a communication from a promoter group entity confirming that in the event of any fund requirement for meeting its impending payment obligations by the company, it shall provide direct or indirect financial support to the extent of ₹2,000 crore," Vodafone Idea said in the filing.
Moondra said that one of the promoters has given assurance of ₹2,000 crore for payments. Still, there is a need to get external funding.
Vodafone Idea's consolidated net loss widened to ₹7,840 crore in the April-June quarter of FY2023-24.
The consolidated revenue from operations during the reported quarter increased marginally by 2.3% to ₹10,655.5 crore from ₹10,406.8 crore in June 2022 quarter.
The total gross debt (excluding lease liabilities and including interest accrued but not due) as of June 30, 2023, stood at ₹2,11,760 crore.
Debt from banks and financial institutions stood at ₹9,500 crore, and money raised through debt instruments stood at 1,660 crore.
The total subscriber base of VIL declined to 22.14 crore at the end of June 2023 from 24 crore a year ago.
Moondra said that to arrest the complete decline in customer base, the company needs to expand 4G coverage and invest in 5G technology.
The company has had an accumulation of vendor payments, which it expects to start unwinding from the next quarter, he added.
"Once we are through with this quarter and we are able to manage our payments through the support of promoters and non-operational cash inflows that we are looking at, we will then be able to manage and kind of start unwinding vendor dues from next quarter," Moondra said.
He pointed out that the current level of mobile service rates needs to go up for customers using higher levels of data.
"Today, we are equalising the price for somebody who is using 5-6 GB to 28 GB per month now that is where we believe it is not the correct structure," Moondra said.
VIL's average revenue per user (ARPU)-- a key growth matrix of telecom operators, increased to ₹139 during the June quarter from ₹128 a year ago.
Moondra said the ARPU range has compressed from zero to ₹2,000 to ₹150 with GST, and everyone is able to meet their requirement with plans costing ₹500-600.
"Now, the requirement is pay as you use more should apply. At the upper end for higher usage, the ARPU needs to go up. This will happen for sure as we start rationalising the tariff," Moondra said.
Source: Live Mint
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Why Trai wants to cut the entry fees for various licences
New Delhi: The Telecom Regulatory Authority of India has proposed reducing the entry fee for various licenses and services and rationalising bank guarantees that service providers pay to the government. The entry fee is a one-time payment that companies must pay when entering the Indian telecom market, and varies with the type of service they offer. Bank guarantees act as backups or contingent payments that the government can encash in case a company fails to meet the licence conditions. Mint explains the development.
Why does Trai want to reduce the entry fee?
The entry fee is usually non-refundable and is part of a firm's startup costs. It varies with the type of service that the company wants to offer. For instance a unified license, which allows all services including mobile telephony, internet broadband and landline services, has a maximum entry fee of ₹15 crore, while a virtual network operator's entry fee is ₹7.5 crore.
While some telecom service providers have called for the entry fee to be abolished, the telecom regulator has suggested a 50% reduction, saying it could cause more companies to enter the market as service providers, enhancing competition. A reasonable entry fee would maintain a balance between deterring non-serious players and ensuring adequate competition.
Trai has pointed out that providers of voice, video and data services have declined from around eight players in each licensed service area to five by 2018 and four at present – Reliance Jio, Bharti Airtel, Vodafone Idea and Bharat Sanchar Nigam Limited. Since reducing the entry fee would lower a company's start-up cost, it would encourage competition and improve the quality of service.
Have entry fees been reduced in the past?
Yes. In 2005 the Department of Telecommunications reduced the entry fee for the national long distance or NLD from ₹100 crore to ₹2.5 crore and for international long distance or ILD from ₹25 crore to ₹2.5 crore. The government at the time said the reduction would promote growth and enhance competition.
By how much does Trai want to reduce the entry fee and for which licenses?
Trai has suggested the entry fee for UL for access service should be reduced from ₹1 crore to ₹50 Lakh for each telecom circle or metro area, and from ₹50 lakh to ₹25 lakh for J&K and the North East. It says the fee for NLD and ILD should be reduced from ₹2.5 crore to ₹50 lakh. The fee for public mobile radio trunking service, a two-way mobile radio service, should be reduced from ₹50,000 to ₹20,000 for each telecom circle.
The fee for an ISP "B" licence or internet service provider for metro areas should be reduced from ₹2 lakh to ₹50,000 for each telecom circle and ₹25,000 for J&K and North-East each.
The fee for an ISP "A" licence, which covers all of India, should be reduced from ₹30 lakh to ₹10 lakh, says the regulator.
The fee for UL (VNO) authorizations for access service should be reduced from ₹50 lakh per telecom circle to ₹12.5 lakh. Trai has also suggested that there should be no entry fee when renewing licenses.
What kind of bank guarantees exist and how could they be rationalised?
Bank guarantees ensure that telecom service providers pay their dues on time and fulfill their obligations in the licence agreement. Financial bank guarantees cover the liabilities from the licence fee and other dues not otherwise securitised, whale performance bank guarantees cover the violation of license conditions. Trai has suggested merging the two on the grounds that it would encourage ease of doing business and encourage growth in the sector.
How much will licence holders need to pay up under the merged bank guarantees?
For a unified license, a total of ₹44 crore has been proposed for the first year. For subsequent years, the amount should be higher than in the initial year or 20% of the estimated sum payable. The merger of both types of bank guarantees has been proposed for mobile number portability licences as well. Trai has also recommended using electronic bank guarantees to enhance the ease of doing business.
Source: Live Mint
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Why has the net neutrality debate surfaced again
New Delhi: Network neutrality, or net neutrality, became the subject of a national debate in 2016, when Facebook (now Meta) pushed for its ‘Free Basics’ service in the country. Over the past month debates around net neutrality have surfaced again, with telecom operators urging the union government to consider taking a stance that would benefit them. Mint explains why net neutrality is back in the news, why telcos are against it, and what 5G has to do with it.
What is net neutrality?
Net neutrality is the principle that internet service providers should enable access to all content and applications regardless of the source, and without favouring or blocking particular products or websites. The core idea behind it is that services accessed through the internet should not differ in terms of the cost of accessing them. This principle has been in place to ensure a level playing field for all websites and a uniform cost of data for customers.
For instance, with net neutrality in place, no user will need to spend more data to access, say, Netflix. The reason is that if such preferential data usage charges are applied, users will move towards what is affordable, and telecom operators end up becoming gatekeepers of information and services on the internet.
Why are telcos against it?
In a recent submission to the Telecom Regulatory Authority of India (Trai), Bharti Airtel, Reliance Jio Infocomm and Vodafone-Idea said that they should be allowed to set a higher cost for services such as WhatsApp and Netflix. Their rationale is that these apps are among the most widely accessed and put lopsided pressure on their infrastructure, increasing their operating costs.
What have these companies said?
A submission by Bharti Airtel dated 1 September read that “large traffic originators that account for a disproportionate amount of these investments must contribute a fair share" of the network cost incurred by telcos. This cost, Airtel said, should be covered “through a direct contribution to telecom service providers (TSPs)" to meet “the vision of Digital India".
Jio's submission on the same also suggested that “both communication and other OTT players contribute towards the cost of this infrastructure development, through direct compensation to TSPs".
What has the government said so far?
In 2016 the government ruled in favour of net neutrality with Trai's Prohibition of Discriminatory Tariffs for Data Services Regulations, 2016. The rule prevents discriminatory tariff for data services between a telco and an OTT service and therefore prevents them from striking any such deals. Now, despite telecom operators seeking a revision to these rules, reports have claimed that the government's stance on net neutrality is unlikely to change.
What does the government intend to do?
The Department of Telecommunications is learnt to have clarified to stakeholders that it does not plan to introduce any revenue-sharing model between the telcos and OTT service providers. Officials have told Mint that there's no such proposal being considered.
To remove any ambiguity on the issue, the government is also learnt to have removed OTT platforms from the definition of 'communication service' in the new telecom bill. Some officials have said that anything to do with these platforms will be under the purview of the IT ministry.
What does 5G have to do with all this?
According to Airtel's submission, “In order to adopt, integrate and sustain new technologies, massive investments are required in the network infrastructure on a continuous basis. The ongoing 5G rollout requires intense fiberization and densification of antennas, the need for which is only going to increase with the future deployments in 6G. These developments will intensify pressure and will have a significant impact on the viability of mobile network operators as well as of other actors in the value chain."
In other words, the telcos claim that 5G networks are expensive to deploy and maintain, and heavy traffic to specific applications increases their costs. They believe OTT services and applications should compensate them for this, which in turn would increase data costs for users.
Source: Live Mint
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Vodafone Idea pays ₹1
Debt-ridden telecom operator Vodafone Idea has paid RsRs 1,700 crore to the government which includes the dues for the 5G spectrum and other spectrum acquired previously.
“We wish to inform that the Company has today, i.e. 16th September,2023, made the requisite payment of ~ Rs. 1,701 crores (including interest) to the Department of Telecommunications, Government of India, towards 2022 Spectrum Auction Instalment," Vi said in the regulatory filing.
Earlier, the telecom firm cleared pending dues of licence fees and spectrum usage charges of about ₹450 crore for the March quarter of 2022-23, a source told PTI.
"Idea/Vodafone annual instalment stands at around ₹160 billion ( ₹16,000 crore) compared to a current annualised EBITDA of ₹100 billion ( ₹10,000 crore). For Bharti, the instalment and annualised EBITDA for India operations stand at around ₹90 billion ( ₹9,000 crore) and ₹230 billion ( ₹23,000 crore), respectively," the report by Deutsche Bank said.
The Union Cabinet in 2021 had approved a big-bang relief package for the stressed telecom sector that includes a four-year break for companies from paying statutory dues, permission to share scarce airwaves, a change in the definition of revenue on which levies are paid and 100 per cent foreign investment through the automatic route.
The measure was aimed at providing relief to companies such as Vodafone Idea that have to pay thousands of crores in unprovisioned past statutory dues.
*With Agency Inputs
Source: Live Mint
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Jio adds 22 lakh mobile users in June
Telecom subscriber base in the country grew marginally to 1,173.89 million at the end of June on account of new customer additions led by Reliance Jio, sector regulator Telecom Regulatory Authority of India (TRAI) said on Thursday, August 22. The subscriber base growth was driven by mobile telephony where Reliance Jio added over 2.27 million new customers and Bharti Airtel added 1.4 million customers, according to the data.
"The number of telephone subscribers in India increased from 1,172.57 million at the end of May-23 to 1,173.89 million at the end of June-23, thereby showing a monthly growth rate of 0.11 per cent," the TRAI said in its monthly subscriber report.
However, the overall growth was mitigated by the loss of subscribers by state-owned BSNL, MTNL and Vodafone Idea (VIL). BSNL lost 1.87 million mobile subscribers, VIL lost 1.28 million subscribers and MTNL (1,52,912 subscribers), according to the data.
The net addition in wireless subscribers of telecom operators in the month of June was 3,73,602. “Total wireless subscribers increased from 1,143.21 million at the end of May-23, to 1,143.58 million at the end of June-23, thereby registering a monthly growth rate of 0.03 per cent," said TRAI.
Overall, Reliance Jio led the race with an active subscriber addition of 4.5 million in May. This was followed by Bharti Airtel Ltd which added 2.2 million subscribers.
However, Vodafone Idea lost 2.3 million subscribers. As a result, Vodafone Idea's active subscriber market share fell by 31 basis points (bps) sequentially to 21.6 per cent, while Jio and Airtel gained market share by 30bps and 8bps, respectively. One basis point is one-hundredth of a percentage point.
After a marginal decline in May, wireline connections has increased in June.
The growth in the wireline segment was led by APFPL which added 6,56,424 new connections. It was followed by Reliance Jio with the addition of 2,08,014 connections, Bharti Airtel (1,34,021), V-Con Mobile and Infra (13,100), Tata Teleservices (12,617) and Quadrant added 6,540 connections in June, according to news agency PTI.
The total broadband subscribers increased to 861.47 million at the end of June 2023 from 856.81 million at the end of May with a monthly growth rate of 0.54 per cent, the report said.
"Top five service providers constituted 98.37 per cent market share of the total broadband subscribers at the end of June-23. These service providers were Reliance Jio Infocomm Ltd 447.75 million, Bharti Airtel 248.06 million, Vodafone Idea 124.90 million, BSNL 24.59 million and Atria Convergence 2.16 million," the report said.
Source: Live Mint
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Reliance Jio, Vodafone Idea, Bharti Airtel to increase workforce by 25% in FY24
Reliance Jio, Vodafone Idea, and Bharti Airtel, India’s top three telcos, are expected to add up to 25% more employees to their existing workforce in Financial Year (FY) 2024, The Economic Times reported. The demand for telecommunications jobs is seeing a rise due to 5G technology.
Following a slowdown due to covid pandemic, the hiring activity of India's top three telecom companies picked up in FY23.
Earlier in January 2023, Mint reported that telecommunication and allied sectors are set to witness 40-45% hiring growth over the next couple of years, with the last 3-6 months recording a 30-36% rise in job offerings.
The demand is expected to be primarily led by emerging segments such as whitespace spectrum, 5G, virtual network operations, network security, IoT in big data, cybersecurity specialists, and cloud, recruiters said, the report further added.
Reliance Jio Infocomm on Monday said it has rolled out 5G services in 26 gigahertz millimetre waves across India and has claimed a record top speed of up to 2 gigabits per second.
"Jio customers now using 26 GHz mmWave-based business-connectivity across all 22 telecom circles," Reliance Jio said in a statement.
The telecom major said it has completed its minimum roll-out obligations in each of the 22 telecom circles, across each of the spectrum bands, ahead of time under the terms of the spectrum allocated to it on August 17, 2022.
Meanwhile, Telecom operator Bharti Airtel on Tuesday said claims worth ₹45,286.76 crore against the company and its subsidiaries are under litigation in various courts across the country.
The pending litigations include a demand of ₹15,178 crore, the highest among all, for one-time spectrum charges that was raised by the Department of Telecommunications (DoT) in January 2013.
Debt-ridden Vodafone Idea has received funding assurance of up to ₹2,000 crore from a promoter group entity, the company said in a regulatory filing on Monday.
The company has reported gross debt of ₹2.11 lakh crore as on June 30, 2023.
"The Company has received a communication from a promoter group entity confirming that in the event of any fund requirement for meeting its impending payment obligations by the Company, it shall provide direct or indirect financial support to the extent of ₹2,000 crore," Vodafone Idea said in the filing.
Source: Live Mint
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