India's third-largest telecom service provider, Vodafone Idea Ltd., says there is a huge catch up on the tariff front for all telecom operators. Tariffs should at least reach a level where the industry can begin to cover its cost of capital, said Akshaya Moondra, chief executive officer at Vodafone Idea, in an interaction with NDTV Profit ahead of its Rs 18,000-crore follow-on public offer that opens on April 18.
A significant correction is needed "from where we are now to reach a level where the cost of capital is covered", said Moondra, adding that there's a sense of urgency because even in a 4G scenario, the cost of capital was not covered for quite some time. The addition of 5G has further exacerbated this situation.
We need to assess the current level of ARPU and the ARPU required to reach the cost of capital. The gap between these figures is much greater than 20% currently, so a 20% tariff correction will not suffice.Akshaya Moondra, CEO, Vodafone Idea
Capex Utilisation Plans
The company will utilise the Rs 18,000 crore largely for capex. A total of Rs 12,750 crore will be used for capital expenditure, with approximately Rs 2,175 crore allocated to spectrum payments and the remaining amount for general corporate purposes.
The capex will not be limited to the equity raised in the FPO. It will raise additional debt funding for capital expenditure for which it is in discussion with the banks. The aim is to have a fully funded plan for the capex needs going forward, said Moondra. Vodafone has also sought shareholder nod to raise up to Rs 25,000 crore in debt from the banks and financial institutions.
Subscriber Additions
The telecom service provider has been losing subscribers on the gross level, though it has been gradually adding 4G subscribers. Moondra believes that the fall of subscribers may have bottomed out. The street is eyeing a net addition of 15 million subscribers annually from now on, the management hopes to meet that expectation.
"We aim to participate in industry growth and achieve a reasonable share," said Moondra. "We're already exceeding expectations in terms of new customer acquisitions, so we hope to meet the investors' expectations," he added.
Government Debt Repayment
The moratorium by the government to repay the dues it is owed on spectrum ends in September 2025.
"Whether we can cover all obligations immediately after the moratorium with our improved cash position remains to be seen," said Moondra, adding that the government reforms package allows for the conversion of the four-year installment series, which can be deferred, into equities by the government.
Hence, while cash generation from the business is expected to improve, it might not be sufficient to cover all government obligations immediately after the moratorium ends, Moondra said. This option will be available starting from October as a form of support if needed, he added.
As a Subscriber you get
Stories
RECOMMENDED FOR YOU
Vodafone Idea Gets Nod To Hike Authorized Share Capital To Rs 1 Lakh Crore
May 09, 2024
Vodafone Idea FPO Issue Price Fixed At Rs 11 Apiece
Apr 23, 2024
Vodafone Idea FPO Retail Portion Undersubscribed At 0.92 Times On Final Day
Apr 22, 2024
Vodafone Idea CEO Says Conversion Of Government Debt To Equity Remains An Option
Apr 15, 2024
POPULAR