Vodafone Idea pays 10% of license fee amidst cash crunch, seeks extension for balance

As per an ET report Vodafone Idea (Vi) has managed to pay only around 10% of its license fee and spectrum usage charge for the June quarter, citing a severe cash crunch. The telecommunications company has sought additional time from the government to clear the remaining balance.

ET report quoting sources revealed that Vi has submitted approximately ₹77 crore to the Department of Telecommunications (DoT) towards license fees, significantly lower than the ₹770 crore due for the April-June quarter. Additionally, the company has settled nearly ₹14 crore in spectrum usage charges (SUC), as opposed to the ₹137 crore owed in the fiscal first quarter.

Facing financial strain, Vi is believed to have requested an extension until October to pay its dues for the June quarter. The company aims to minimize operational continuity risks and accommodate the interests of all stakeholders, especially given the ongoing delay in concluding its much-needed fundraising efforts.

This isn't the first time the joint venture between Vodafone Plc and Aditya Birla Group has struggled to clear its statutory dues. In the previous quarter, Vi also failed to meet its obligations to the DoT and was granted time until July 31 to pay the full license fee in installments. The government, which holds a 33.1% stake in Vi, has previously been flexible with the telco's delayed payments.

However, Vi may face consequences for the delayed payment as per its license agreement, including interest charges. Currently, telecom operators are required to pay 8% of their adjusted gross revenue (AGR) as license fees to the DoT. Failure to meet statutory dues can result in penalties.

Vi's cash crunch has been exacerbated by the reduced revenue share for SUC following the government's decision to waive this statutory fee for airwaves acquired from last year's 5G auction onwards. Previously, Vi's quarterly SUC payout amounted to over 1% of AGR, but the recent change has brought it down from 3-4% of AGR.

In the past three quarters, Vi's license fee payments ranged between ₹600 crore and ₹800 crore, as per insiders familiar with the situation.

By the end of FY23, Vi's net debt reached ₹2.09 lakh crore, while the company held a modest cash balance of ₹230 crore. Data from the company indicates a debt of ₹11,390 crore from banks and financial institutions during the quarter.