Vodafone Idea approaches DoT, seeks 1-year moratorium on Rs 8,200 cr spectrum instalment due in 2022

Cash-strapped Vodafone Idea Ltd (VIL) has approached the government to seek one-year moratorium on payment of spectrum instalment of over Rs 8,200 crore, due in April 2022.

VIL, in a letter to the Telecom Secretary on June 25, 2021, has said it will be "unable to pay the instalment of Rs 8,292 crore due on April 9, 2022" due to "cash being used for payment of AGR (Adjusted Gross Revenue) dues and the inability of the operations to generate the required cash in a predatory pricing situation".

As per the letter, seen by PTI, the company has requested the Department of Telecom to grant it another year of the moratorium to pay this instalment in April 2023 instead of April 2022 and has made it clear that "it is almost inevitable" that the firm will not be able to pay the said amount in April 2022.

VIL has also said that while it is working on raising new funding for the last six months, "investors are not willing to invest in the company because they believe that unless there is a significant improvement in consumer tariffs, the health of the industry will not recover and they will incur a loss on their investment".

A detailed mail sent to VIL on the issue did not elicit a response.

In its communication to the DoT, VIL said that after the grant of a two-year moratorium earlier, AGR judgement was pronounced, which has taken away Rs 7,854 crore of cash as upfront payment. Also based on the current demands of the DoT, it will have to pay AGR instalments of about Rs 9,000 crore in March 2022. Given the company's request for corrections on those demands, while the amount may reduce to nearly half, it will still take away liquidity to the extent of Rs 12,500 crore from the business.

VIL has also rued the lack of movement on floor price regulation that aimed "to address the current situation of predatory pricing and losses".

The floor price regulation was a support that the industry had expected from the government, but it has not happened, VIL has flagged in its letter to the telecom department.

VIL has further highlighted the poor health of the telecom industry, "which is a result of a prolonged period of prices remaining below the costs".

"This has resulted in a situation, where we have a challenge in meeting some of our large payment obligations," the company has said.

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