Vodafone Idea Plans On Cutting Cost By Rationalizing Operations And Merging Telecom Circles

CIOReviewIndia Team | Wednesday, 11 March 2020, 08:48 IST

                                 Vodafone Idea Plans On Cutting Cost By Rationalizing Operations And Merging Telecom Circles

Operationally merging 6-7 of its weaker telecom circles with stronger ones, Vodafone Idea is focusing on prominent markets as the loss-making telecom carrier moves to cut costs. However, this decision will impact many of the employees who will be asked to leave their jobs. According to the sources, the teleco who has employees about 11,000 is working on severance packages for the workers.

The sources have also said, Vodafone Idea might even consider giving up the spectrum in its weaker circles in near-future. During the time of the merger, Vodafone Idea had a market capitalization of Rs. 43,000 crore, and currently Idea has completed integrating 17 of its 22 circles, according to its latest quarterly report. A senior executive at the teleco said, “The mood is edgy in the organization and the sense of uncertainty has upset morale.” Vodafone Idea’s very survival hinges on an upcoming verdict by the Supreme Court on the issue of adjusted gross revenue (AGR). While statutory dues might be the only relief the government provides. Moreover, including staggering interest and penalties of the AGR dues over the period of several years and reducing some non-AGR dues such as license fees and spectrum usage charges, the Union Cabinet is expected to later this week announce relief measures for the telecom sector.

For the relaxation in AGR payment schedule for telecom operators which include Vodafone Idea, Cabinet move is expected when the apex court will hear a modification plea filed by them before March 17.  While the company has already paid Rs 3,500 crore to the department, it is expected that they would further pay Rs. 3,500 crore to the Department of Telecommunications (DoT) in the coming day or two. Telco’s own assessment shows that their due amounted to Rs. 21,533 crore form which the principal amount is close to around Rs. 6,854 crore. 

This troubled company has asked for 15 years’ time to pay its AGR dues completely where GST refund of Rs. 8,000 crore would be compensated for the AGR liability. Also, to remain financially viable, they have also pleaded for reducing spectrum usage charges and license fees. And, considering a report by Goldman Sachs, the company’s gross cash balance was $1.8 billion as of December 19, with spectrum dues of $450 million payable this month.

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