![\"\"](\"\/\/www.iser-br.com\/Themes\/Release\/images\/responsive\/ettelecom-default.jpg\")
Kolkata | Mumbai: Significant cash flow relief, estimated by analysts at nearly Rs 1 lakh crore, and government backing will allow Vodafone Idea<\/a> (Vi) to not only survive the next four years but also beyond, said an Aditya Birla Group (ABG) executive. The company will be able to infuse cash into operations, boost capex and fight aggressively in the market, besides becoming more attractive to potential investors, added this executive.
“Government backing will give investors the confidence and help plough funds into the company,” he said, while contradicting the view of some analysts who have said the relief package announced by the government on Wednesday may not be enough to address the company’s long term liquidity crunch issue.
‘Clear message from govt’
<\/strong>
In meetings with government officials in the lead up to the package, Vi officials said that the telco has “lined up potential investors” but they will only invest once they are sure the industry is viable to invest in. ABG chairman Kumar Mangalam Birla<\/a> had also previously blamed unviability of the sector as the chief reason for the company’s inability to raise Rs 25,000 crore despite trying for nearly a year. Vodafone Plc<\/a> owns 44.39% in Vi while Aditya Birla Group holds 27.66%.
The executive quoted earlier said the relief package would also give confidence to Vi’s employees, who can now focus on work and “not be on the lookout for jobs”, a development that would also help the telco fight its nearest rivals Bharti Airtel<\/a> and Reliance Jio<\/a> more effectively.
The government on Wednesday announced a four-year moratorium on adjusted gross revenue (AGR) and spectrum payments, a move which allows Vodafone Idea to defer a cumulative payment of nearly Rs1 lakh crore – around Rs24,000-25,000 crore annually - over four years.
Other crucial reforms include giving operators the option to “pay the interest amount arising due to the said deferment of payment by way of equity”. The Centre also has the option of converting operators’ dues owing to the deferred payment into equity at the end of the moratorium period, guidelines for which will be finalised by the finance ministry.
“The government has clearly underlined that it wants a three-private player market. It wants competition. It has gone to the extent of saying it is there to back up Vodafone Idea even four years later. How much more confidence can the government show in a company,” the Aditya Birla Group official said.
Brokerage Jefferies said while Rs 25,000 crore annual cashflow relief to Vi does improve its chances of surviving for longer, the government could end up owning 26% of the loss-making carrier at the end of four-year period, if the company chooses to convert the cumulative interest of Rs 9,000 crore over four years into equity that will be owned by the Centre. Investors may not want to be part of a telco which runs the risk of being government-owned some years later, warned an analyst at BNP Paribas.