TelecomLive April-2020

AGR Dues www.telecomlive.com 41 Telecom LIVE April 2020 time of its merger had a market capitalisation of Rs 43,000 crore, has completed integrating 17 of its 22 circles. CLSA upgrades Vodafone Idea on good earnings pros- pects On March 13, 2020 CLSA has upgraded stock of loss-making Vodafone Idea to 'buy' from 'sell' and raised target price on the stock to Rs 12 from Rs 3.5 as it believes the risk-reward has turned favourable. The brokerage has upgraded the stock also because of lower AGR risk, likeli- hood of its operating profit before tax tripling and its focus on top circles. The stock had touched an all- time low of Rs 2.6 in November 2019, and it has tanked 80 per cent in the last one year. Bloomberg data show that five analysts have a buy rating on the stock but majority of the analysts tracking the stock have a hold or sell rating. Nine analysts have a hold recommendation on Vodafone Idea and six analysts have a sell stance, with consensus target price at Rs 6.75. CLSA said Vodafone Idea's AGR dues will likely be 40 per cent of ad-hoc provisions and growth is set to accelerate led by tariff hikes, and cash EBITDA is likely to triple by FY22. Vodafone Idea's market share in its top-10 circles, which form 77 per cent of its revenues, at 31 per cent is 1 percentage point ahead of Bharti Airtel, and Vodafone Idea may even look to give up spectrum in its weak circles, said CLSA. “Our scenario analysis reveals that with a cut in AGR dues, likely set-off of a Rs 80 billion tax refund, Vodafone Idea's cumula- tive funding need will be US$2.3 billion including hefty spectrum payments from FY23,” said CLSA. Floor rates needed for mobile data, not for voice services: COAI Batting for fixation of minimum rates for mobile data services, COAI has told Trai that floor price should be applied uniformly to all categories of subscribers and for all type of tariff plan offerings. It said while there is an urgent requirement of a floor price for data services, it does not see any such need for voice calls and voice tariffs should remain under for- bearance. "There is a need to fix the floor price for mobile data services...At this stage we also submit that floor price structure must have a subscription / connectivity charge irrespective of use even for voice," COAI said in its latest submission to Trai on “Tariff Issues of Telecom Services”. With regard to data services, the COAI said it is of the view that floor price should be applied uni- formly to all categories of sub- scribers and for all type of tariff plan offerings. But, if one looks at the submis- sions made by Bharti Airtel to Trai, it wants the users at the bot- tom of pyramid to pay more at Rs 30 per GB, and at the top of pyra- mid to pay less at Rs 5 per GB. This it has termed as “Telescopic Price Model (Pay less as you use more)”. Conclusion Going by the above submis- sions, it can be safely said that the actual cost of data is about Rs 5 per GB, while presently, the mar- ket driven tariff is above Rs 10 per GB on an average. No regulator, including Trai, can allow higher tariffs than what is the cost of the “most efficient operator”. There- fore, the telcos have to work on improving their efficiencies con- tinuously, instead of looking towards the government, for bail- outs. They should come out of this tendency and compete openly. ing banking & finance, education, oil & gas, FMCG and defence verticals. Vodafone CEO meets govt Vodafone Global CEO Nick Read has told the government that the company wants to make a new and good beginning in India. Mr Read - who met Finance Minister Nirmala Sitharaman and Telecom Minister Ravi Shankar Prasad separately on March 6 - sought government assistance to keep Vodafone Idea afloat. Vodafone Idea is pushing the government to allow it to pay AGR dues over 18 years. In a letter to DoT, the finance ministry and Niti Ayog, the telco, which has over 300 million subscribers, said it needs help from the government to stay in business. In its letter, the operator sought a goods and services tax (GST) refund of Rs 8,000 crore, which can be adjusted against its AGR dues, and the option of paying the remaining amount in a staggered manner - over 15 years - after an initial moratorium of three years. The letter also calls for a reduc- tion in licence fees and SUC. Telcos annually pay 8 per cent of AGR as licence fees; Vodafone Idea wants it reduced to 3 per cent. The industry has been long calling for a reduction in SUC as well, which is paid at 3-5 per cent of AGR. Vodafone Idea wants it brought down to 1 per cent. Vodafone Idea to rationalise operations Vodafone Idea has started oper- ationally merging 6-7 of its weaker telecom circles with stronger ones, as the loss-making company moves to cut costs and focus on prominent markets. The decision is expected to result in another round of job losses. The telco, which employs about 11,000 peo- ple directly, is working on sever- ance packages for the workers. The operator is also considering giving up spectrum in its weaker circles where revenue is low. Vodafone Idea, which at the Airtel’s Telescopic Price Usage per month Rates per Month Upto 05 GB Rs 30/GB > 05 GB to 10 GB Rs 20/GB > 10 GB to 15 GB Rs 10/GB > 15 GB Rs 05/GB