Vodafone Idea, BSNL Merger Should Get Green Flag

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Vodafone Idea and BSNL Merger Should Get Green Flag

Vodafone Idea is one company that stands on the plank with a big question over its survival. Burdened by dues which it has to pay on Adjusted Gross Revenue, spectrum allocation and other operational expenses, the company stands amidst financial ruins. Late at night on Wednesday, the billionaire, Kumar Mangalam Birla, also tendered his resignation from Vodafone Idea. Not only this, but the company’s market cap has been taking a beating from its public shareholders on the market as well. However, is there an end to Vi’s problems, or is it simply headed to the graveyard of other companies which lost the telecom battle? It seems that Kumar Mangalam Birla himself might have given the answer before he left his seat at the table.

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Birla’s Plan at Work

Birla, a few weeks back in a letter to Cabinet Secretary, Rajiv Gauba wrote that he is willing to sell his stake to a public or private entity to save the company. If the government agrees to this, then Vodafone Idea’s troubles might evaporate in thin air. The company, which is owned 27% by Aditya Birla Group with around a 44% stake by the British Vodafone Plc, will be handled by the government partially then. A synergy between the public telecom company Bharat Sanchar Nigam Limited (BSNL) and Vodafone Idea would not only be financially healthy for Vi but also for the public telco as well.

Vodafone Idea’s Fundraising Plans Have Failed

While Vodafone Idea is ailing for some cash infusion, and all its plans of fundraising, which it floated last year in September, have failed, BSNL has its own troubles of a missing 4G network. The public telecom company has not yet received airwaves that would help it in launching the fourth generation network for its subscribers. This also remains the reason why BSNL is losing subscribers at a rapid rate on the prepaid front. Vodafone Idea is on a similar boat, but it has exactly what BSNL needs, that is, a 4G network. While BSNL can take on the dues of Vodafone Idea, which are to the tune of Rs 1.5 lakh crore for the AGR issue, Vodafone Idea would be able to provide it with a ready 4G network which BSNL can then claim as its own.

Just What the Other Needs

This move is likely to fasten up the BSNL 4G network availability by quite a margin. Besides, the worries of Vodafone Idea are likely to melt away since the AGR issue, which is a battle of its own in the courtrooms and has repeatedly been petitioned against, will come under the government’s worries. Hence, it seems that in this case, BSNL and Vodafone Idea have what the other needs, and if the merger of these two companies goes through then, they would fit together like jigsaw pieces, at least in the context of the Indian telecom industry. It remains to be seen what are the forces that stop this from happenings, as there seem to be plenty. But, for the sake of maintaining the three-player industry structure, it is imperative for Vodafone Idea to stay in the game, as its absence would lead to a dangerous duopoly between Bharti Airtel and Reliance Jio.

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