In a worrisome development for Vodafone Idea, the delay in securing a crucial funds infusion of Rs 5,000 - Rs 7,000 crore from its promoters has raised concerns among top officials in the telecom department. The failure of Vodafone Idea's promoters to deliver on their commitment to inject funds into the struggling telecom carrier has disappointed officials, LiveMint quoted sources familiar with the department's view.
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Funding Delay Sparks Concern
Despite assurances, the promoters have been unable to fulfil their promise to infuse the minimum required funds, leaving officials questioning their ability to raise external funds. The lack of timely capital injection has had repercussions on Vodafone Idea's operations, including its ability to introduce 5G services.
Impact on 5G Rollout and Competitors
In contrast, rival telecom players Reliance Jio and Bharti Airtel have been making rapid strides in their 5G rollout plans, aiming to achieve comprehensive urban area coverage by year-end.
Although Vodafone Group and Aditya Birla Group, the promoters of Vodafone Idea, had invested Rs 4,500 crore in March 2022, no fresh capital infusion has occurred since then. This absence of funds has not only hindered the company's growth prospects but has also hampered its network upgrade initiatives, according to the report.
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Vodafone Idea a Subject of Discussion within Department
The report quoted a second official who said Vodafone Idea has been generating funds to meet its quarterly dues with interest. However, a substantially larger amount of capital is required to modernize and enhance its network infrastructure. These concerns have been the subject of discussions within the telecom department in recent weeks, even as Vodafone Idea is working on a revival plan.
Telecom secretary K Rajaraman, in a May interview, said that Vodafone Idea is in talks with banks and financial institutions to secure the necessary resources. He expressed optimism that the company would share its revival plan with the government within a month. Rajaraman emphasized the importance of Vodafone Idea's funding for its 5G rollout plans.
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Government Shareholding and Licensor Role
The government became the largest shareholder in the company, holding a 33 percent stake, in lieu of interest on dues amounting to over Rs 16,100 crore in the form of spectrum charges and adjusted gross revenue.
Although the government clarified that it would not interfere in the daily management of the telco, it has closely monitored crucial aspects such as subscriber numbers, quality of service, and 5G deployment, given its role as a licensor. The telecom department wants Vi to come back with equity and debt resources and is waiting for final communication from them.
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The industry will keenly await Vodafone Idea's proposed revival plan and the subsequent actions taken by the company to address its funding challenges. The company has been experiencing a decline in subscribers, losing over 2 million subscribers in February alone, according to the Telecom Regulatory Authority of India (TRAI).
