Telecom Diary: No 5G may spell doom for Vodafone Idea – ET Telecom

Telecom Diary: No 5G may spell doom for Vodafone Idea – ET Telecom

In close to a year of India rolling out fifth generation or 5G services primarily led by Reliance Jio and Bharti Airtel, the third-largest telco Vodafone Idea (Vi) is grappling with uncertainty amid cash crunch.

With the absence of 5G, subscribers continue to leave Vi, and near-dismal spend on network expansion is making it rather tough for the ailing telco to stay competitive.

The lack of funds and the telecom department’s mandate to meet minimum rollout obligations have proved to be a double whammy for the stressed telco whose fate is in limbo today.

The touted Rs 2,000-crore bailout by a promoter is too little, too late while the announcement has come at a time when the telco’s Q1 loss widened to Rs 7,840-crore.

The loss-making telecom carrier although added that it would use a ‘grace period’ of 30 days to pay back Rs 1.680-crore to the government towards the annual installment for 5G spectrum purchase, already due this week.

Last August, it bought 5G spectrum in the 3300 MHz and 26 GHz frequency bands for Rs 18,799 crore. The airwaves were allocated to Vi by the middle of September 2022, and that binds the telco to fulfill mandatory auction conditions.

For the past few quarters, Vi, a JV between UK-based Vodafone Group and India’s Aditya Birla Group (ABG), has been trying to raise funds but remained unsuccessful.

Keep 4G network expansion or a 5G deployment aside, even outstanding payments to vendors and immediate statutory liabilities are unavoidable.

The situation which was expected to improve following the government picking up equity, has only deteriorated.

The Indian government has become the telco’s single-largest stakeholder with a 33.1% share after it converted its accrued interest towards adjusted gross revenue (AGR) arrears into equity early this year.

If analysts are to be believed, then there is a strong possibility that the government may double its stakeholding in Vodafone Idea, by converting principal statutory dues into equity.

Vodafone UK has a 32.3% share, while the Kumar Mangalam Birla-headed conglomerate has an 18.1% stake, taking a combined shareholding to 50.4%.

It’s no secret that Vi’s situation appears to be scary with never-ending woes.

The telco’s cash and cash equivalents stood at a modest Rs 250 crore as of June-end.Vi is set to face more than Rs 40,000 crore annual regulatory payouts from FY26 onwards when the four-year moratorium comes to an end.

Recently, Goldman Sachs anticipated that in the absence of meaningful tariff hikes in the near-term, Vi requires nearly $10 billion of fresh capital over the next two years to have a competitive mobile broadband network in order to face arch-rivals Reliance Jio and Bharti Airtel.

On the back of scheduled debt repayment of Rs 7,000 crore in FY24, Vodafone Idea’s liquidity situation continues to appear grim, according to another brokerage firm.

Now, at a time when Jio and Airtel took next-generation commercial service availability to more than 6,000 locations nationwide, the future of Vodafone Idea looks bleak.

But hopes are alive. Miracles do happen! No?“,”next_sibling”:[{“msid”:102859779,”title”:”5G service quality should not suffer u2018under any circumstancesu2019: TRAI official”,”entity_type”:”ARTICLE”,”link”:”/news/industry/5g-service-quality-should-not-suffer-under-any-circumstances-trai-official/102859779″,”category_name”:null,”category_name_seo”:”industry”}],”related_content”:[],”seoschemas”:false,”msid”:102860024,”entity_type”:”ARTICLE”,”title”:”Telecom Diary: No 5G may spell doom for Vodafone Idea”,”synopsis”:”Last August, it bought 5G spectrum in the 3300 MHz and 26 GHz frequency bands for Rs 18,799 crore. The airwaves were allocated to Vi by the middle of September 2022, and that binds the telco to fulfill mandatory auction conditions.”,”titleseo”:”industry/telecom-diary-no-5g-may-spell-doom-for-vodafone-idea”,”status”:”ACTIVE”,”authors”:[{“author_name”:”Muntazir Abbas”,”author_link”:”/author/479234376/muntazir-abbas”,”author_image”:”https://etimg.etb2bimg.com/authorthumb/479234376.cms?width=250&height=250&imgsize=15046″,”author_additional”:{“thumbsize”:true,”msid”:479234376,”author_name”:”Muntazir Abbas”,”author_seo_name”:”muntazir-abbas”,”designation”:”Editor”,”agency”:false}}],”analytics”:{“comments”:0,”views”:266,”shares”:0,”engagementtimems”:1322000},”Alttitle”:{“minfo”:””},”artag”:”ETTelecom”,”artdate”:”2023-08-19 19:00:00″,”lastupd”:”2023-08-19 19:00:00″,”breadcrumbTags”:[“Vodafone Idea”,”5G”,”Vodafone Idea 5G”,”Vodafone Idea news”,”Reliance Jio”,”Bharti Airtel”,”telecom news”,”Vodafone Idea 5G network”,”Department of Telecommunications”],”secinfo”:{“seolocation”:”industry/telecom-diary-no-5g-may-spell-doom-for-vodafone-idea”}}” data-authors=”[” muntazir data-category-name=”Industry” data-category_id=”18″ data-date=”2023-08-19″ data-index=”article_1″>

Last August, it bought 5G spectrum in the 3300 MHz and 26 GHz frequency bands for Rs 18,799 crore. The airwaves were allocated to Vi by the middle of September 2022, and that binds the telco to fulfill mandatory auction conditions.

Muntazir Abbas


Read by:

100 Industry Professionals


Reader Image Read by
100 Industry Professionals

In close to a year of India rolling out fifth generation or 5G services primarily led by Reliance Jio and Bharti Airtel, the third-largest telco Vodafone Idea (Vi) is grappling with uncertainty amid cash crunch.

With the absence of 5G, subscribers continue to leave Vi, and near-dismal spend on network expansion is making it rather tough for the ailing telco to stay competitive.

The lack of funds and the telecom department’s mandate to meet minimum rollout obligations have proved to be a double whammy for the stressed telco whose fate is in limbo today.

The touted Rs 2,000-crore bailout by a promoter is too little, too late while the announcement has come at a time when the telco’s Q1 loss widened to Rs 7,840-crore.

The loss-making telecom carrier although added that it would use a ‘grace period’ of 30 days to pay back Rs 1.680-crore to the government towards the annual installment for 5G spectrum purchase, already due this week.Last August, it bought 5G spectrum in the 3300 MHz and 26 GHz frequency bands for Rs 18,799 crore. The airwaves were allocated to Vi by the middle of September 2022, and that binds the telco to fulfill mandatory auction conditions.

For the past few quarters, Vi, a JV between UK-based Vodafone Group and India’s Aditya Birla Group (ABG), has been trying to raise funds but remained unsuccessful.

Keep 4G network expansion or a 5G deployment aside, even outstanding payments to vendors and immediate statutory liabilities are unavoidable.

The situation which was expected to improve following the government picking up equity, has only deteriorated.

The Indian government has become the telco’s single-largest stakeholder with a 33.1% share after it converted its accrued interest towards adjusted gross revenue (AGR) arrears into equity early this year.

If analysts are to be believed, then there is a strong possibility that the government may double its stakeholding in Vodafone Idea, by converting principal statutory dues into equity.

Vodafone UK has a 32.3% share, while the Kumar Mangalam Birla-headed conglomerate has an 18.1% stake, taking a combined shareholding to 50.4%.

It’s no secret that Vi’s situation appears to be scary with never-ending woes.

The telco’s cash and cash equivalents stood at a modest Rs 250 crore as of June-end.Vi is set to face more than Rs 40,000 crore annual regulatory payouts from FY26 onwards when the four-year moratorium comes to an end.

Recently, Goldman Sachs anticipated that in the absence of meaningful tariff hikes in the near-term, Vi requires nearly $10 billion of fresh capital over the next two years to have a competitive mobile broadband network in order to face arch-rivals Reliance Jio and Bharti Airtel.

On the back of scheduled debt repayment of Rs 7,000 crore in FY24, Vodafone Idea’s liquidity situation continues to appear grim, according to another brokerage firm.

Now, at a time when Jio and Airtel took next-generation commercial service availability to more than 6,000 locations nationwide, the future of Vodafone Idea looks bleak.

But hopes are alive. Miracles do happen! No?

Join the community of 2M+ industry professionals

Subscribe to our newsletter to get latest insights & analysis.

Newsletter icon

Leave a Reply

Your email address will not be published. Required fields are marked *