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Vodafone winding up India biz: Competition to Airtel jinxed?

The departure of Vodafone marks the third occasion after Essar Cellphone and Hutch when the original competitor of Airtel could not sustain

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Economy Business Vodafone winding up India biz: Competition to Airtel jinxed?

In yet another instance of the oldest competition to Bharti Airtel in north India failing, Vodafone, one of the largest telecom companies in the country, may shut down its business in India. News agency IANS has reported this. According to the report, Vodafone is running a loss. However, the company has not yet released any statement to this effect. If the report holds, this will be the third occasion after Essar Cellphone and Hutchison Essar — in the era when only two telecom players were allowed per circle out of the 16 circles in the country — that the competition to Airtel could not sustain the business.

Significantly, after the arrival of Reliance Jio, Indian telecom company Idea and Vodafone merged and now both companies work together. According to the report, Vodafone is packing up. It will make the announcement any day that it is leaving the country. This is due to operational losses and a decline in market capitalisation.

The report says that Vodafone has lost millions of customers in the recent past. The company has suffered losses in the latest financial quarter. Stock market values ​​are steadily decreasing. In June 2019, the company has incurred a loss of Rs 4,067 crore, which is almost twice more than 2018 at the same time. Besides, the worst of all, Vodafone has a large base of unsatisfied customers who find other networks offering better connectivity in different parts of the country.

A few days ago, there was a report that Vodafone-Idea was preparing to take the support of a lender to collect the outstanding amount. However, later Vodafone rejected that report and said that the company was paying the arrears as per schedule.

The Supreme Court has asked Vodafone-Idea to pay Rs 28,309 crore in the adjusted gross revenue (AGR) judgment. According to the report, if possible, the company could apply for a review of this court order. Kotak Institutional Equities has said, “If the company does not get relief in the outstanding liabilities of Rs 28, 500 crore, it will be difficult for Vodafone Idea.”

With Vodafone leaving, another ‘foreign’ rival of Airtel bites dust

The Times of India had written in 2007 about the Hutch-to-Vodafone sale: “Vodafone’s buyout of Hutchison’s stake in Hutch Essar, which fetched Hutch a near 700% return on its equity investments in India, has become a telling example of India’s failure to attract and retain large-scale FDI in telecom.”

Before that, Hutchison Max Telecom Ltd (HMTL), a joint venture between Hutchison Whampoa and the Max Group, established on 21 February 1992, had received the licence to operate in Mumbai (then Bombay) circle from the Department of Telecommunications (DoT) in November 1994. The cellular service branded “Max Touch” was launched the same year. Hutchison Max entered the Delhi telecom circle in December 1999, the Kolkata circle in July 2000 and the Gujarat circle in September 2000. Between 1992 and 2006, Hutchison acquired interests in all 23 mobile telecom circles of India.

However, in February 2007, Hutchison Telecom announced that it had entered into a binding agreement with a subsidiary of Vodafone Group Plc to sell its 67% direct and indirect equity and loan interests in Hutchison Essar Limited for total cash consideration (before costs, expenses and interests) of approximately $ 11.1 billion. The Acquisition was completed on 8 May 2007.

The latest and successful competitor of Airtel, Reliance Jio, has indigenous roots, unlike Essar-turned-Hutch-turned-Voda.

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