Vodafone Group infuses Rs 1,530 crore into Vodafone Idea

Vodafone Group Plc has infused Rs 1,530 crore (US$ 217.05 million) to Vodafone Idea as accelerated payment to help it manage its operations. This investment has offered some relief to the cash-strapped telco which has to pay hefty statutory dues to the government.
The payment has been accelerated by the Vodafone Group to provide Vodafone Idea with liquidity to manage its operations, and to support the approximately 300 million Indian citizens who are Vodafone Idea customers as well as the thousands of Vodafone Idea employees during this phase of emergency health measures, taken as a result of the COVID-19 pandemic," said the UK-based telecom company in a statement.

Vodafone Group further added that under the terms of the contingent liability mechanism (CLM), it is required to make payments to Vodafone Idea where amounts paid “pursuant to the contingent liabilities of Vodafone India exceed those of Idea Cellular". The CLM took effect at completion of the merger of Vodafone India and Idea Cellular in August 2018.

This mechanism was inked while completing the largest merger of India Inc. Vodafone Group, Aditya Birla Group and Idea Cellular decided that Vodafone Group and Vodafone Idea would pay back each other on set dates for certain identified pre-merger liabilities and assets that could crystallise in future. Vodafone Group’s potential exposure under this mechanism is limited to Rs 8,400 crore (US$ 1.19 billion).

This liquidity infusion will also help the telco to pay part of its adjusted gross revenue (AGR)-based dues. Vodafone Idea had paid over Rs 1,300 crore (US$ 184.42 million) towards license fees and spectrum charges for the January-March quarter.

Although, it also faces additional AGR-based dues of Rs 58,254 crore (US$ 8.26 billion), of which Rs 6,854 crore (US$ 972.34 million) has been paid to the Department of Telecommunications (DoT) in three tranches last month.

"Following the decision by India’s Supreme Court on the definition of Adjusted Gross Revenue (“AGR”) in October 2019, India’s telecoms operators became liable for licence fees, penalties and interest dating back over 14 years. Vodafone Idea has made payments to the Government of India in relation to its AGR liabilities," the statement added.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.