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What does the future hold for Vodafone<\/a> Idea, now that the relief package has come? Is the worst over?<\/strong>
This is the boldest step the government has taken. The moratorium for 4 years and the BGs (bank guarantees) which have been onerous on the industry<\/a>. We (Vodafone Idea<\/a>) would have approximately Rs 23,000-25,000 crore of BGs sitting with the government at any given point in time. It is just a piece of paper and not that it is cash and these steps have removed the stress.
The government has sent a message that this is an important sector, important for digitization of the country, has a huge impact on growth and digitization of the economy and they are willing to make changes for growth of the economy.
Second part is competitiveness in the sector. They (government) want three private players to continue, even though they have talked about more players, but definitely three players in the market have to stay. They do not want a duopoly and certainly do not want a monopoly in the sector. It is critical for the country and government that there are three (private) players.
Now what does that mean for Vi?<\/strong>
There is no doubt that this company will survive and not only will it survive, it will do well and also compete in the market. It was always our conviction but not always understood by other market participants.
The government has said to invest in the company, after you have spent on expenses, and become more competitive. We can invest in coverage, improving customer experience, improving services, digitization of services. This will make us more competitive and focused.
We have been engaged in fundraising for a while and while there has been interest, there have been concerns on if the government is serious about a three-player market, is there going to be enough competition in the sector.
Now with the package, it paves the way for more investments to come in. Those investments will be invested in the company rather than pay off the government which was part of concerns that the investors had - that I am going to invest but it will not be invested in the company but go in paying dues to the government.
Our networks are already here and there are future 5G auctions.
How close are you to raising funds? Will parents infuse funds?
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Government’s announcements have been game changing in the area of fundraising. We talked to investors and the concerns that they brought up have been addressed. We are waiting for full clarity on the package. The Cabinet has announced its decisions and it gets converted into specific guidelines, they should be coming in a few days. That will allow us to kickstart the fundraising process all over again. We expect a fairly quick turnaround time given the fact that the issues that the investors were bringing up have been addressed.
Will promoters invest fresh equity in Vodafone<\/a> Idea?
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Promoters have invested a lot in this business. In the last 10 years, more than Rs 190,000 crores of investments have been made by promoters. As we go into this fund-raising, they will have an opportunity to participate as well. Now whether they choose to do so or don’t or how much they participate is a choice they will make. I feel confident about the future growth of this company.
How much cash relief does the 4-year moratorium give in your hand? What is the structure of fundraising are you looking at?
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I don’t want to speculate as the government calculations are yet to come in.
Board had an approval of Rs 25,000 crore and this is a game changer in what this fundraising will allow us to do compared to earlier. As soon as we get the details on the package, our intent is to quickly update our business plans and take it to the Board. We have no preconceived preferred way in our minds on how we would like to raise funds, we are open to all ways and will consider all mechanisms.
Are you planning to raise more than the Rs 25,000 crore initially planned?
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I cannot say more or less but we have to update our plans and take it back to the Board. This is a significant development.
Are promoters ready to dilute equity?
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It is up to them. But I do not think they have ever said that they will stand in the way of the company raising funds even if that means they have to dilute. They have always been very supportive and I expect this support going ahead. They will support whichever is the right mechanism.
Will Vi exercise the right to convert debt to government equity?
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There are two different mechanisms. One - when you opt for deferment of 4 years, there is interest which can be converted into equity. Then there is the second phase where after 4 years of deferment, repayments will start...those are scheduled differently, depending on the type of payment – whether AGR, or spectrum.
On the interest conversion itself, we will be more open to convert to equity based on Board approval and guidelines. We need to see terms and understand.
Four years later, we need to understand terms of conversion and secondly we will have at that time the opportunity for the decision to be made...no need to worry what will happen four years from now because we do not know where the company will be. But having that flexibility is very very helpful.