Vodafone Idea Limited (VIL) is focusing hard on improving/upgrading the fundamental pillar of its business – networks. The telco has been struggling for some time because of not being able to provide equal quality coverage as Airtel and Jio to consumers, especially when it came to 4G and 5G. This took Vi’s business in a downward spiral because the telco’s finances came under the hit as the customers started porting out of the networks.
While Vi could raise money and then invest into the networks for better experience for the customers, it simply couldn’t. Vi found it extremely hard to raise funds because the telco’s debt mountain grew extremely fast. The government’s fight for the AGR (adjusted gross revenue) dues pushed Vi’s debt levels beyond Rs 2 lakh crore. At such a juncture, where the telco was losing revenues and customers and the services are so cheap, investors weren’t willing to lend a helping hand to Vi. In fact, Vodafone UK Plc, a promoter of Vi decided to write down the value of the telco as zero.
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Govt Steps in to Reduce Debt
Vodafone Idea got major help from the government after the telco’s financial situation worsened. The government decided that it would reduce the telco’s debt and instead take equity against it. This was important for the government to do because it meant no more threats of a duopoly market in India. If Vi goes out of business, that won’t be right for the market in terms of competition.
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However, things don’t simply become good for Vi because of debt reduction. There’s still plenty of debt and the funds that the telco is raising is going towards capex (capital expenditure). Despite investing in networks, Vi’s customer base is reducing fast. Vi’s active user base now stands around 175 million, declining at an alarming rate.
This is not a good sign. For Vi to sustain in the long run, the telco needs to add customers. That is what the telco has not been able to do for years now. One thing is certain, Vi is not going anywhere. The telco is just struggling, but with more funds to raise via debt, the telco could turn things around in the near future.
