Vodafone Idea Ltd’s (VIL) stress once again became apparent as its annual report for FY21 reflected mounting losses and burgeoning debt levels. For starters, the Chairman’s letter to the shareholders was addressed by Mr Himanshu Kapania, and not Kumar Mangalam Birla. Kapania is on the board of the company and the non-executive chairman after Birla stepped down.

Here are some of the key excerpts of the letter written by the chairman Mr H Kapania:

“Through the course of FY21, the operating environment continued to remain challenging due to unsustainable pricing and hyper-competition which were further aggravated by the COVID-19 pandemic,” Kapania said.

Here is how FY21 looked in numbers:

Subscriber market share on visitor location register (VLR) stands at 25.7 percent,

Wireless revenue market share at 23.2 percent

Loss of Rs 46,293 crore

Net worth at -37,707.6 crore

Debt on books at Rs 1.79 lakh crore vs Rs 1.12 lakh crore

The big problem for the company is the high spectrum costs, Kapania said. He said operators in China do not have to pay for spectrum, whereas for VIL, spectrum represents more than half of the capital employed in the business. Despite that China’s average revenue per user is almost 4 times that of India’s.

The outlook for the company is also blurry given the Supreme Court’s rejection of the modification application to allow the Department of Telecommunications (DoT) to correct arithmetic errors in the computation of AGR demands. Subsequently, on August 10, 2021, the Company has filed a review petition.

Amidst these uncertainties, VIL has big payments coming up:

Non-convertible debentures (NCDs) worth Rs 6,000 crore are due for payment between Dec-Fed 2021

It has written to DoT for deferment of the spectrum payment instalment of Rs 8,211.7 crore payable as of April 9, 2022

Deferred Payment obligation pursuant to AGR judgment of Rs 60,960 crore to be paid in 10 instalments starting march 2022

The company is focusing on cost optimisation and prioritising 4G investments. It has achieved 65 percent of targeted annual savings of Rs 4,000 crore and is driving incremental 4G investments in the 16 priority circles. These circles contribute 94 percent of revenue to VI and 86 percent to industry revenue. And it has also initiated 5G trials with major network partners.

Even as the company acknowledges it is a difficult phase, Kapania remains hopeful the government will provide the necessary support to address all structural issues faced by the sector.

(Edited by : Yashi Gupta)

First Published:Sept 7, 2021 10:39 AM IST