Vodafone Idea (Vi), the third-largest telecom operator in the country, is under a serious cash crunch. This is the reason why it couldn't invest as much as the other telcos during the spectrum auction for 5G airwaves. In addition, the 4G capex of Vodafone Idea is much lower than what Airtel and Jio are spending. This has given Airtel and Jio an opportunity to eat away the market share of Vi in every way possible. Then there is the equity conversion that's pending from the side of the government. Everyone knows that until the time govt takes its stake in the company and things become clearer as to how that's going to work out, only then the external investors would make a move, given if they are interested in the company at this point.
Vi has not been able to Raise Funds for Years Now
The cash-strapped telco has been trying to raise funds for years now, but nothing good has come out of it. Now, according to a Livemint report, the centre wants Vi promoters to infuse more capital into the company before it converts the interest dues into equity for itself. The government is expected to hold around a third of the company once the equity conversion process is completed. But now the government wants the promoters, including the Aditya Birla Group and Vodafone UK, to infuse more capital into the company.
The government has had this condition for the promoters once before as well. Vi enjoyed the benefits of the relief measures that were announced by the Department of Telecommunications (DoT) back in September 2021. It has been more than a year now, and yet the company's situation doesn't seem to improve much.
The promoters have been hesitant to dip their legs further into the struggling telecom company. Vi has shown no signs of recovery even after the previous tariff hikes. Thus, it only makes sense that the promoters don't want to invest further. But right now, it is a condition by the government that's been put forward to the promoters, and unless that happens, the government won't go ahead with the equity conversion.