Gone are the days when Vodafone banners dominated mobile sim and refill shops alongside Airtel and Idea, as Reliance Jio has joined Airtel as India’s top telco. Even in collaboration with Idea, Vodafone continues to post losses, and has lost six million subscribers in the July-September quarter, as it lags behind rivals in rolling out 5G. With stock prices below Rs 10 per share, the telco’s woes have worsened with the government halting the conversion of the Rs 16,000 crore debt it owes to the telecom department into the state’s stake in the firm.
How did it come to this?
The government has told Vodafone to first roll out 5G services and bring investors on board, before the Department of Telecom can convert its debt into equity. The debt is a result of the accrued interest on deferred AGR dues that Vodafone, Airtel and other telcos refused to pay for years, before being instructed by the Supreme Court to comply. After the apex court allowed staggered payment of AGR dues, Airtel paid for four years in advance, while Vodafone Idea took a four year moratorium or break from payments.
Airtel weathered the storm, Voda-Idea face turbulence
As for the interest to paid on dues, Airtel which has grown stronger by gaining subscribers leaving Vodafone, has decided to pay the amount instead of offering a stake to the government. But an ailing Vodafone Idea decided to issue a 33 per cent share in the company to the DoT in lieu of the interest worth more than Rs 16,000 crore.
Voda-Idea’s multiplying troubles
Bogged down by the massive debt, Vodafone Idea is now third among only three private telcos with the only other option being state-owned BSNL. It’s parent firm Vodafone Plc had earlier refused to infuse more funds into the Indian venture, but has agreed to invest Rs 500 crore this year. Vodafone Idea subscribers also faced a risk of losing services, since tower infrastructure provider Indus Towers wanted it to pay up or lose access.
Is more competition on the horizon?
Fortunately Indus Towers has agreed to softer terms by Vodafone Idea, which includes 100 per cent payment of bills after December 31, 2022, while the rest of the dues will be paid in the first six months of 2021. But the interest on AGR dues only adds to the debt pile, as Vodafone still hasn’t set a date for a 5G rollout, while Airtel and Reliance Jio have already launched the service in eight and 13 cities respectively.
As Vodafone Idea loses ground, fast-growing conglomerate Adani has acquired a license for full-fledged telecom services, and even secured a small chunk of the 5G spectrum. The entry of another major player in India’s telecom space, might be the last thing Vodafone needs right now.
