The Death Of Vodafone Idea Starting To Become A Real Prospect PORTABLE

The Death Of Vodafone Idea Starting To Become A Real Prospect PORTABLE

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The death of Vodafone Idea starting to become a real prospect

Vodafone Idea, the third largest mobile network operator in India, is facing a bleak future as it struggles to pay its massive debts and retain its dwindling subscriber base. The company, which was formed by the merger of Vodafone India and Idea Cellular in 2018, has been losing money and market share ever since. Its promoters, the Aditya Birla Group and the Vodafone Group, have expressed their unwillingness to invest more in the beleaguered telco, leaving it at the mercy of the government and the courts.

But what if Vodafone Idea dies What will be the consequences for the Indian telecom sector, the consumers, the government and the economy Here are some possible scenarios that could unfold if Vodafone Idea goes out of business.

A duopoly of Airtel and Jio

The most obvious outcome of Vodafone Idea's demise would be the emergence of a duopoly of Airtel and Jio, who together account for over 80% of the wireless subscriber market share in India. This could have negative implications for competition, innovation and consumer choice in the telecom industry. A duopoly could also lead to higher tariffs and lower quality of service for the customers, as the two players would have less incentive to compete on price or performance.

According to Sanjay Kapoor, former CEO of Bharti Airtel, a duopoly would be a setback for the Indian telecom sector, which had introduced more players to increase competition and improve customer experience. \"We started with a duopoly. We introduced more people because we were not happy with what the two guys were doing and we are back to that,\" he told Business Insider.[^2^]

A loss of revenue for the government

Vodafone Idea's exit would also mean a loss of revenue for the government, which is already facing a fiscal deficit due to the pandemic. The company owes over â1.75 lakh crore to various creditors, including â58,254 crore to the Department of Telecommunications (DoT) as adjusted gross revenue (AGR) dues. The company has so far paid only â7,854 crore of its AGR dues and has sought relief from the Supreme Court on its payment schedule.

If Vodafone Idea goes bankrupt, the government may not be able to recover its dues from the company or its promoters. The government may also lose out on spectrum fees, license fees and GST collections from Vodafone Idea's operations. Moreover, the government may have to bear the social cost of unemployment and disruption caused by Vodafone Idea's closure.

A collateral damage for ancillary service providers

Vodafone Idea's collapse would also have a ripple effect on other stakeholders in the telecom ecosystem, such as tower companies, equipment vendors, distributors and retailers. These entities depend on Vodafone Idea for their revenues and cash flows and may face financial stress or bankruptcy if Vodafone Idea stops paying them or shuts down its services.

For instance, American Tower Corporation (ATC), which owns over 78,000 telecom towers in India, has 3.18% stake in Vodafone Idea and derives 14% of its revenues from the company.[^1^] If Vodafone Idea defaults on its payments or surrenders its towers, ATC may suffer a significant loss of income and valuation. Similarly, other service providers like Indus Towers, Nokia, Ericsson, Huawei and ZTE may also face losses or litigation if Vodafone Idea fails to honour its contracts or obligations.

A possible intervention by the government

Given the dire consequences of Vodafone Idea's death for the telecom sector and the economy, some experts have suggested that the government should intervene to save the company from going under. The government could offer some relief measures to Vodafone Idea, such as moratorium on spectrum payments, reduction in license fees and spectrum usage charges, staggered payment of AGR dues or equity infusion.

In fact, in February 2023, the government ordered Vodafone Idea to convert its interest dues worth â16,133 crore into equity at â10 per share, making it the single largest shareholder in the company with 32.09% stake.[^3^] However, this move did not improve Vodafone Idea's financial situation or investor confidence.

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