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HomeEconomyBusinessVodafone Idea crisis: Industry on high alert

Vodafone Idea crisis: Industry on high alert

Both Airtel and Vodafone Idea are contemplating filing review petitions in the SC again on the AGR issue but experts feel this won’t yield a positive outcome

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Vodafone Idea, which was banking on a favourable ruling from the Supreme Court on Adjusted Gross Revenues (AGR) modification plea, is trying to pick up the pieces to stay afloat and in the process has put vendors, banks and consumers on the tenterhooks.

During the week, Kumar Mangalam Birla stepped down from his position as non-executive chairman and director of Vi and was replaced by Himanshu Kapania, a non-executive director and former managing director of the erstwhile Idea before its merger with Vodafone India.

Earlier, Birla had written to the government on 7 June, offering to hand over the Aditya Birla Group’s 27.66% stake in Vi to any public sector or domestic financial entity who could keep the company afloat. Without immediate government support, the telco would be driven to an irretrievable point of collapse, he had said.

These developments have ruffled the telecom equipment vendors who are closely monitoring the situation, though have not yet reached out to Vodafone Idea seeking immediate payment of the dues. Lenders to Vodafone Idea are also expected to hold talks next week to decide on the future course of action on the dues. Its mobile users are shifting to other telcos in fear of its shutting down operations. Vodafone Idea has been losing subscribers constantly.

Without naming Vodafone Idea, Bharti Airtel chief executive Gopal Vittal recently said he expects the government to offer quick relief to the telecom sector to ensure that India remains a market of at least three private players.

In other news, due to the Covid lockdown and low tariffs, Bharti Airtel’s consolidated net profit fell down to Rs 284 crore in the April-June quarter from Rs 759 crore in the January-March quarter. Though, it had posted a of Rs 15,933 crore a year back. The average revenue per user grew marginally to Rs 146 from Rs 145 on a quarterly basis. The recent tariff hikes may help the telco to improve its ARPU, which is a key matrix for profitability.

The telecom industry has reduced to three private players from 12 once when it was a favourite of the foreign players. The situation has come to such a point now that the once booming telecom market may reduce to just two players.

UK’s Vodafone is not the only foreign telco to have faced rough waters in India. Several global telcos, including Etisalat, Sistema and Telenor had to exit the Indian telecom market following the Supreme Court ruling in 2012 to cancel all new licenses issued by former telecom minister A Raja.

Vodafone Idea has been trying to raise Rs 25,000 crore from investors but has not seen any success yet. Vi is reeling under a huge debt of 1.8 lakh crore, out of which a staggering 1.5 lakh crore has to be paid to the government. Deferred spectrum dues stand at Rs 96,270 crore, AGR dues at Rs 58,400 crore, and a bank debt of Rs 23,080 crore.

The last hope for Vodafone Idea is some relief from the government. The government has moved a bill in the Parliament to scrap retrospective taxation, which was a big issue with Vodafone and other foreign players. The government is working on some measures for the telecom industry but nothing has been announced.

Both Airtel and Vodafone Idea are contemplating filing review petitions in the SC again on the AGR issue but experts feel this won’t yield a positive outcome. We can only wait and watch.

Lastly, the top telecom player Reliance Jio has joined Bharti Airtel in its fight against the 5Gi standard. Indian telecom operators have informed the Department of Telecommunications that the so-called Indian 5G standard, 5Gi, doesn’t have a device ecosystem and it should only be considered as optional and non-mandatory for the industry. Besides, making the standard mandatory would increase prices of smartphones.

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