New Delhi: Rising Vodafone Idea (VI) debt burden, which is on the rise, could lead to a financial burden on banks, according to rating agency Icra. It warned that the impact would be felt by employees as well as subscribers. In such a situation, the VI needs government support, it said in its report. Spectrum’s deferral of arrears, reduction of levies, reduction of interest rates on arrears.
If Vodafone’s Idea exits the sector, it could hurt the tower industry, with 1,80,000 towers expected to be vacated. About 40-50 percent of these towers could be rebuilt in the next 18-24 months.
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Vodafone Idea owes Rs 23,400 crore to lenders Also, the government owes Rs 1,68,190 crore in the form of the spectrum and deferred AGR arrears. VI has been recording large-scale losses for the last 12 quarters (from the second quarter of 2018-19). In addition to AGR payments, the debt burden (including lease payments) has crossed Rs 2 lakh crore by June 30, 2021. In addition, the company is in a position where revenue and profits will not increase due to pressure on the ARPU level, “said Icra Group Head Savyasachi Mujumdar.
Ikra senior head Ankit Jain said in the report that support was needed mainly in the form of deferral of spectrum arrears. “If the license fees and spectrum charges paid by telecom companies are reduced, EBITDA will increase,” he said. A one percent reduction in these changes would save the industry Rs 1,600 crore annually, ”he said. Also, ICRA estimates that an increase in the average per capita income (ARPU) by Rs.
The burden will be reduced if TRAI’s recommendations are implemented
The Cellular Operators Association of India (CAI) has said that the abolition of ‘Right of way charges’ (ROWs) over the next five years will significantly reduce network roll-out costs (switching to new services and technology) for companies, as suggested by the Telecom Regulatory Authority of India (TRAI). TRAI recommended to the Center on August 31 that it coordinate with state governments to waive ROW charges for the next five years (2020–23 to 2027–28).
ROW charges are paid for each mobile tower permit, for laying optical fiber cable per kilometer. TRAI noted that the exemption from these charges would be a stimulus to the expansion of fixed-line broadband nationwide. ROW also suggested bringing in a web-based national portal for approvals.
After the jio’s entry into the market 5 years back many telecom companies faced huge losses and they had to shut down their businesses in India. Companies like Uninor, Tata Docomo, Reliance Aircel had to quit their businesses. Vodafone and Idea decided to merge to stay in competition however merger also did not able to save their fate. They are reporting huge losses and subscribers losses every quarter whereas jio is increasing their subscribers base every quarter. The only Telecom player which is trying to compete with Jio is Airtel which is having the second most subscribers in India.
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