Vodafone Idea (Vi), the third-largest telecom operator in India, is soon going to face a lot of issues if things don't fall in line for the telco. A few weeks back, there was a report quoting a senior government official that said Vi needs funds by January or Feb 2023 for survival. December is about to end in three days, and there haven't been any positive developments for Vi in the fundraising department. 2023 is going to be the year when millions of Indians will experience 5G for the first time. But sadly, these customers might not be Vi users but Airtel and Jio users. Let's take a look at what's happening with Vi as 2022 comes to an end.
Vodafone Idea has No Clear Roadmap for 5G
Until Vodafone Idea sorts out its funding issues, the telco won't be able to deliver a specific timeline or a roadmap for 5G. This has been echoed by the management of the company already. With proper funding, Vi would be able to place orders to vendors who are not going to be working on a credit basis with the telco. Vi's debt mountain is already big, and vendors wouldn't like to expose themselves further.
5G is going to be a crucial differentiator in the future revenues of the telcos. While a slight delay to launch 5G shouldn't be a big issue for Vi, the fact that there's no clear roadmap is what's concerning.
Debt Unpaid to Vendors, Banks and Other Financial Institutions
At the end of Q2 FY23, Vodafone Idea said that its gross debt stood at Rs 2,203.2 billion. This amount doesn't include the lease dues. The telco had decided to issue optionally convertible debentures (OCDs) to the American Tower Company (ATC) amounting to Rs 16 billion for clearing its dues. While the move to issue OCDs was approved by the shareholders, the fact that the government hasn't converted the interest dues into equity for itself made ATC wait to subscribe to the OCDs.
Govt Not Converting Dues
The Indian government, which had given a lifeline to the telecom industry in September 2021, is now not proceeding with the conversion of interest dues into equity in Vi. The telco's fundraising plans have been stuck because of that. Even ATC didn't subscribe to the OCDs. The government wants the promoters of the telco to infuse capital before the equity conversion happens. Even the government wants the telco to give a clear roadmap on 5G and what will the future business plan look like.
Vodafone Idea has been losing subscribers continuously for several months. In October 2022, according to the TRAI (Telecom Regulatory Authority of India) report, Vi lost 3.5 million users. October is the month when telcos launched 5G in India. With the absence of 5G in the short term, Vi will definitely lose out on subscribers who want to use 5G.
The promoters have time and again shown that they are not interested in infusing any further capital into Vi. The telco's stuck in a trying situation. If it doesn't pay off the financial institutions, Vi can also be dragged into the insolvency court. There only positive for Vi has been the rising overall revenues. But with that, even the losses have widened.
The tariffs in the telecom industry aren't sustainable at the moment. The telcos will definitely go ahead with the tariff hike in the coming months. However, despite the previous tariff hikes, Vi's average revenue per user (ARPU) figure is below Rs 150 mark, while its competitors - Jio and Airtel, are near the Rs 200 mark.
For now, things don't look good for Vi. It would be interesting to see what's in store for the telco in 2023.