Hot Pursuit     16-Sep-21
Vodafone Idea spurts about 14% in two sessions after cabinet measures
Vodafone Idea surged 10.64% at Rs 9.88 after the government approved several measures to extend a lifeline to the cash-strapped telecom sector.
Shares of Vodafone Idea rose 2.76% to settle at Rs 8.93 in the previous session. The stock has surged 13.69% in two sessions.

The Union Cabinet on Wednesday announced nine structural reforms and five procedural reforms for the telecom sector, including a fixed calendar for spectrum auctions with an extended tenure of 30 years for future spectrum allocations, and a mechanism to surrender and share spectrum.

Foreign direct investment (FDI) in the sector has also been allowed up to 100% under the automatic route, from the existing limit of 49%. The cabinet decided to bring know-your-customer (KYC) reforms, allowing an app-based self-KYC and bringing down the e-KYC rate to Re 1.

Further, the cabinet approved a redefinition of the much-litigated concept of adjusted gross revenue (AGR) to exclude non-telecom revenue and a four-year moratorium on players' dues to the government. The cabinet also provided an option to the telecom service providers (TSPs) to pay the interest amount arising due to the moratorium of payment through equity.

The earlier definition of AGR, upheld by the Supreme Court in 2019, had made telcos liable to pay Rs 1.6 lakh crore. The change in definition that will reduce the burden on telcos, applies only prospectively, so those past dues remain payable. Interest on those dues will now be compounded annually instead of monthly and the interest would be charged at a ‘reasonable' rate of marginal cost of funds-based lending rate (MCLR) plus 2%.

Ratings agency ICRA has assessed that the moratorium on AGR dues provides annual cash flow respite of around Rs 14,000 crore for the industry, while the moratorium on spectrum dues gives another Rs 32,000 crore of annual cash flow relief for the industry as a whole.

Following the cabinet announcement, Kumar Mangalam Bina, chairman, Aditya Birla Group said, "The pathbreaking reforms announced by the government today will go a long way in unshackling the telecom sector. These reforms demonstrate the government's firm commitment to ensuring healthy growth of the industry. The measures also reflect the decisiveness of the Prime Minister, the Telecom Minister, and the government to address long-standing issues. These reforms will bring alive the digital aspirations of 1.3 billion people and accelerate lndia's journey to be a digitally powered economy as envisaged by our Honorable Prime Minister."

Nick Read, CEO, Vodafone Group said: “We commend the resolve shown by the Government of India, under PM Modi's leadership, to find a comprehensive solution that would support a competitive and sustainable telecom sector n India.”

Vodafone Idea's total gross debt (excluding lease liabilities and including interest accrued but not due) as of 30 June 2021 stood at Rs 1,91,590 crore, comprising of deferred spectrum payment obligations of Rs 1,06,010 crore and AGR liability of Rs 62,180 crore that are due to the government and debt from banks and financial institutions of Rs 23,400 crore. Cash & cash equivalents were Rs 920 crore and net debt stood at Rs 1,90,670 crore.

Vodafone Idea reported a consolidated net loss of Rs 7,319.1 crore in Q1 FY22 as against a net loss of Rs 25,460 crore in Q1 FY21. Gross revenue declined by 14.1% to Rs 9,152.3 crore in Q1 FY22 as against Rs 10,659.30 crore in Q1 FY21.

Meanwhile, telecom sector major Bharti Airtel was down 0.20% to Rs 724.10. It surged 4.53% on Wednesday.

In a regulatory statement, Bharti Airtel said it welcomed the path breaking policy directions and interventions announced by the Government of India to support the telecom industry that has been battered by unprecedented stress, high debt and low return on investments.

The reform package heralds a new dawn for the Indian telecom industry and will catalyse explosive growth of this vital sector. More importantly, it paves the way for a sustainable three private plus one state owned telecom operator structure to serve alarge market like India, it added.

Gopal Vittal, MD & CEO (India and South Asia), Bharti Airtel said: “For over two and a half decades, Bharti Airtel has pioneered India's telecom revolution. These fresh reforms will further boost our efforts to invest in this exciting digital future and enable us to be one of the leading players in India's digital economy. More needs to be done, however, towards a sustainable tariff regime to ensure the industry gets a fair return. This will in turn allow it continue investing in new technologies and innovation to bring world-class services to customers."

Bharti Airtel's Net Debt-EBITDA ratio (annualized) and including the impact of leases as on 30 June 2021 was at 3.03 times as compared to 3.02 times as on 30 June 2020. Excluding pending AGR dues, the Net Debt-EBITDA ratio (annualized) is at 2.55 times as on 30 June 2021.

Bharti Airtel reported a consolidated net profit of Rs 284 crore in Q1 FY22 as against a net loss of Rs 15,933 crore in Q1 FY21. Total revenues increased by 15.3% YoY to Rs 26,854 in the first quarter.

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