Telecom Turmoil: Vodafone Idea's Struggles Escalate with Rs 3,273 Crore Fee Review

In a significant development, the Department of Telecom (DoT) has addressed Vodafone Idea's representation regarding a license fee demand totaling Rs 3,273 crore. This move places Vodafone Idea's shares under scrutiny, as per an official filing by the telecom operator. Vodafone Idea had contested license fee charges of Rs 1,749 crore for the fiscal year 2016 and Rs 1,524 crore for the fiscal year 2017.

Source: https://www.inventiva.co.in/

In a significant development, the Department of Telecom (DoT) has addressed Vodafone Idea's representation regarding a license fee demand totaling Rs 3,273 crore. This move places Vodafone Idea's shares under scrutiny, as per an official filing by the telecom operator. Vodafone Idea had contested license fee charges of Rs 1,749 crore for the fiscal year 2016 and Rs 1,524 crore for the fiscal year 2017.

The company had previously communicated with the DoT, urging corrections in the alleged "errors in demands" up until the financial year 2016-2017. However, no action has been taken on these requests thus far. In response, Vodafone Idea has filed a review petition in the SupremeCourt, seeking directives for rectification of these discrepancies. This petition is currently awaiting a hearing in the court.

In a bid to resolve ongoing financial obligations, Vodafone Idea recently remitted Rs 1,701 crore, inclusive of interest, to the Department of Telecom (DoT) pertaining to the 2022 spectrum auction installment. Moreover, the company announced its intention to pay an installment of nearly Rs 1,680 crore to the DoT, availing a 30-day grace period with interest.

Adding to the telecom operator's challenges, Indus Towers, a tower company, conveyed to TRAI that Vodafone Idea's failure to meet contractual payments has led to severe financial and operational complications. This non-payment has significantly impacted cash flow, working capital, and overall financial performance, as stated in the letter accessed by CNBC-TV18.

As of September 30, 2023, Vodafone Idea's outstanding dues to Indus Towers amount to Rs 7,864.5 crore. PD Vaghela, the outgoing Chairman of the Telecom Regulatory Authority Of India (TRAI), expressed concern about Vodafone Idea's ability to roll out 5G services. Notably, the company has not disclosed a specific timeline for the launch.

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In the midst of these challenges, brokerage firm CLSA highlighted that Vodafone Idea has witnessed a decline of 1.5 percentage points in its all-India revenue market share over the past year. The firm emphasized that without capital expenditure cuts, the market share loss is unlikely to subside. Planned fundraising is deemed crucial for both the 5G rollout and enhancing the stock's risk-reward profile, according to CLSA, which maintains a sell rating on Vodafone Idea with a price target of Rs 7. On Thursday, Vodafone Idea's shares concluded nearly one percent lower.