Vodafone Idea opts for the 4-Year Moratorium for Spectrum Payments

Vodafone Idea, India's third largest private telecom operator, has told the DoT that it will go for the 4-year moratorium for spectrum payments, announced under the telecom relief package on September 15th.

Vi Bites the Bullet, Becomes First to go for 4-Year Moratorium

The telco has seen some very public issues related to its survival recently. However, the storm has passed, and Vi becomes the first one to jump on the rescue ship.

Along with its confirmation, the telco also asked when it will receive its BGs back; recently, the government had reduced the BG requirement for licensing agreement from 100% to 20%. However, it has held onto the decision of converting the interest on the dues to equity yet. It has 9 more days to decide on that; if it does go for it, the government will become a shareholder in the telco.

The telcos can also opt for converting principal statutory dues of the deferred payment into equity after 4 years. Vi MD Ravinder Takkar has already said that the telco will remain open to convert interest to equity.

An industry executive said, "Vi has opted for the 4-year moratorium and also sought details on the status of its BGs. Whether it opts for AGR moratorium and converts the interest on deferred payments into equity, will be told to DoT later".

The telecom relief package will allow Vodafone Idea to save up to Rs. 25,000 crore in annual cash flows. Coupling that with the returning BGs worth Rs. 23,000-25,000 crores, and Vi will have enough cash to bring some stability and balance to its books. Right now, the telco has a debt of over Rs. 1.9 lakh crore, and out of that, Rs. 1.6 lakh crore are statutory dues.

Therefore, it looks likely that the telco will at least convert the interest to equity. Whether it goes for converting all of its dues to equity remains a separate matter; the latter move will make the Center a significant stakeholder in the telco. At the current market cap the dues amount to 5.33%; though it remains unclear as to what market cap the government will set as a benchmark for this.

That will not be in either party's interest; the Government does not want another BSNL at their hands, while Vi won't want government involvement in its operations.