Vodafone Idea seeks debt recast

Vodafone Group Plc’s Indian venture, reeling under $14 billion of net debt, mounting losses and dwindling subscribers, has approached creditors for better payment terms to revive the sinking carrier, people with direct knowledge of the matter said.

Vodafone Idea Ltd., formed by last year’s merger of the British telecommunications firm’s local unit with billionaire Kumar Mangalam Birla’s Idea Cellular Ltd., has warned lenders that it won’t be able to honour its commitments for long under current conditions, the people said, asking not to be named as the discussions are private. One of its requests was a temporary halt to loan payments, although no formal proposal has been made, two of the people said.

A spokesman for Vodafone Idea said the company hasn’t asked lenders to rework payment terms and the carrier continues to pay all its debts as and when they fall due. “The financial stress in the telecom sector is well acknowledged and all telecom operators have asked for requisite help in reducing it,” the firm said in the statement. A spokesman for the Newbury, UK-based Vodafone Group pointed to a filing by the India venture in July that stated Vodafone Idea had been in discussions with lenders for some waivers in the prior quarter. He didn’t comment further.

The distress at India’s No. 2 phone operator deepened last week after the nation’s top court ordered it to pay about $4 billion in past dues, dealing a fresh blow to the struggling business. Vodafone Idea has been losing subscribers and reporting losses every quarter since the two partners announced their merger in 2017, while the entry of billionaire Mukesh Ambani’s wireless provider Reliance Jio Infocomm Ltd. a year earlier with free calls and cheap data added to the venture’s woes.

The court ruling on October 24 was part of a wider legal dispute over the way Indian carriers calculate revenue. The nation’s top court upheld the government’s method, and told several companies, including now-defunct ones, to pay about $13 billion in total.

An upfront liability for Vodafone India may compel it to appeal to the National Company Law Tribunal, analysts G.V. Giri and Balaji Subram-anian at IIFL Securities Ltd wrote in a report last week, referring to the quasi-judicial body that handles insolvency petitions.

Should the government take substantial steps to ease the burden of the carriers, Vodafone Idea may not press for a debt recast, some of the people said.

Vodafone Group, which has been pulling out of far-flung markets to focus on Europe, isn’t keen to plow any more money into the Indian venture, which is “ring-fenced,” Chief Executive Officer Nick Read said in September. The Newbury, England-based firm agreed to sell its New Zealand unit for $2.2 billion in May.

The British firm reluctantly participated in a rights issue by Vodafone Idea earlier this year that raised Rs 25,000 crore ($3.5 billion), some of the people said.

The losses at the Indian carrier may be pushing Vodafone Group toward the exit door, more than a decade after it entered what was once its most promising market. Since its acquisition of Hutchison Whampoa Ltd’s Indian operations in 2007, the UK company has been dogged by a $2.2 billion tax bill —a case it’s still fighting with the Indian government despite a ruling in its favor by the nation’s top court in 2012.

In a filing on July 26, Vodafone Idea said in the quarter through June 30 it classified Rs 10,200 crore from non-current borrowings to current maturities of long-term debt for not meeting some covenant clauses for specified financial ratios.