Vodafone Idea Survival in Question, What’s Happening

The Indian government has made it very clear that the promoters need to infuse more capital into the company. In addition, the telco must also come up with a new business plan. The government is not converting the dues of Vi into equity for itself because the stake might not mean much if the company is not doing good.

Highlights

  • Vodafone Idea (Vi), the third-largest private telecom operator in India, is now again facing questions of survival.
  • Even the promoters have, time and again, shown their disinterest in infusing fresh capital into the company.
  • The government has put the same condition time and again in front of the Vi promoters.

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Vodafone Idea

Vodafone Idea (Vi), the third-largest private telecom operator in India, is now again facing questions of survival. Back in September 2021, when the Indian government announced a relief package or relief measures for the telcos, Vi benefitted a ton and the questions over its survival were gone. However, the concerns of the company going out of business soon are lurking again. Vodafone Idea (Vi) has not been able to raise any funds apart from what the promoters put up earlier this year.

Vodafone Idea Will Go Out of Business Soon?

According to an ET report, a senior government official said that Vi needs funds by January-February 2023; otherwise, it will be hard for the company to survive. Vodafone Idea has been trying to raise funds for many years now. However, the telco has not been able to make any positive developments in that area. There are many concerns for investors when it comes to infusing money into Vi.

Even the promoters have, time and again, shown their disinterest in infusing fresh capital into the company. There were reports in 2021 that Kumar Mangalam Birla wanted to hand over his stake in Vi to the government. It even makes sense that the promoters don't want to dip their legs further into the company, which hasn't been generating business for them.

What Does the Govt Want?

As per the report, the Indian government has made it very clear that the promoters need to infuse more capital into the company. In addition, the telco must also come up with a new business plan. The government is not converting the dues of Vi into equity for itself because the stake might not mean much if the company is not doing good.

The government has put the same condition time and again in front of the Vi promoters. In fact, there were reports a few days back which said that the government is also ready to prepare a comprehensive package for Vi to bail it out if the telco's promoters can invest more money.

One thing is clear; no outside investor would ever put money into Vi right now. The telco has been losing subscribers, doesn't have enough capital to launch 5G and compete with other operators, and can't even expand 4G aggressively. Vi also has a ton of debt its needs to repay to the gear vendors as well as financial institutions. The company is facing the threat of bankruptcy in the short term if it can't raise funds from its promoters or outside investors.

Things need to move fast for Vi to survive. The telco's ARPU (average revenue per user) is currently the lowest amongst all the private telecom service providers.

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