Vodafone idea news is the most repeated telecom news which I used to hear in my childhood. These too-old telecom giants Vodafone Group plc and Birla’s Idea formed a VI limited entity in August 2018. At present there is a rumour that Vodafone & idea limited they are in discussions with Elon Musk Starlink for seamless internet services for their subscribers. This tie-up with Starlink was picturized by a magazine business world. However, the company has stated that it was false information.
Although this rumour made the share price of Vodafone & idea stocks 21% upward in the Indian stock market. The magazine cooked up the story that the company is ready to give the government a stack of 33% in their company to Starlink for their services in India.
Apart from these things let’s get into the journey of Vodafone & idea limited company combined as they were two different firms at first. They have recorded a cumulative loss of 13 lakh crores in the years 2018, 2019, and 2020. vodafone and idea’s combined annual revenue and EBDITLA have fallen to 44,978 and 5,210. EBITDA means earnings before interest, tax, depreciation, and amortization.
Rise Vodafone idea:
On 31st August 2018, VIL was formed. This company is among India’s Fortune 500 companies and also the only company to list a loss of 44,233 crores. Apart from this Vodafone has its past problems which have lasted over a long period and prevented it from spreading its business empire. They had a taxation case over the acquisition of Hutich’s Essar’s assets which was done in 2007. The case is in the Supreme Court and adjusted gross revenue caused the 4 services to roll out very slowly.
Despite of this in 2020 Supreme Court gave its final regarding the DOT over the AGR case and regulation of payments. All the telecom companies lost the long 14-year battle. Supreme Court on 14th Feb 2020 rejected the applications of telecom companies to defer paying tax levies to the Indian government.
Supreme court ordered Vodafone and idea to pay 44,00 crores at that time which includes AGR and spectrum fees. In this situation, company is at a stage to shut down their services in India. The Indian government has memories of non-bank lender infrastructure leasing issues and the financial services collapse in 2018. Now telecom firm exiting India impacts India’s financial system and government revenue also.
Removal of Duopoly through Vodafone idea:
However the exit of Vodafone & idea leads to the duopoly of the telecom market which leads to high tariffs and stokes inflation. Analyzing these future causes government was lending some time for a solution to this problem. The government need to manage 3 major issues. They have obeyed the Supreme Court decision and kept healthy telecom sector and consumers’ interests. DOT and digital communication need to be later approved by the cabinet.
This safe game from the government side to help the consumers, helped Vodafone and idea Lsustain itself in the market. DOT later asked all the operators to swift up their AGR dues and submit their documents regarding this. Airtel, Tata, and Vodafone and idea have made their partial payments regarding this.
Government help for Vodafone idea:
The Indian government is working on exploring a 3rd party audit firm that is going to pay the due of telecom operators after the difference occurred in calculation by the government.
In fact this move is nothing but the government is trying to get private firms which provide concessional rates to repay the dues of telecom companies. Also, the government are in search of soft loans for vodafone and idea from the Universal Obligation Fund. The has a corpus of 50,000 crores.
Any sector in this world goes into a monopoly or duopoly the prices of the products or services get higher and higher. There will be another firm to supply the service at a lower price. So, the government doesn’t want to create this duopoly in the telecom industry and trying to save vodafone and idea company from exiting India.
Entry of JIO into market:
VIL had its major downfall due to the soft launch of Reliance Jio back in 2015. Where Ambani pulled over the market at that time. He has grabbed pan India license approval from the Indian government to provide voice and 4G services.
Ambani went for the price to take over the market at any cost. Landing to the present time Jio is the largest telecom firm in revenue market share and count of subscribers too.
In 2021 Birla Group stated that they are ready to hand over their stake to the government which is 27%. This move by them in 2021 made the Vodafone and idea company back into the race at a slow pace.
Vodafone and idea made its biggest move by seeking a four-year moratorium from 2021 to 2025. Both vodafone & idea and Bharati Airtel opted for this. A moratorium means a legal authorization to debtors to postpone the payment over the desired period.
Rise of Vodafone idea:
The AGR(annual gross revenue) moratorium offered to VIL is a relief as they can defer the cumulative payout of only over 1 lakh crore. In addition to this DOT(department of telecommunication) has released bank guarantees for the license-free and spectrum range fee of 2,500 crores. As the payment has staggered vodafone and idea can invest more in the expansion of the network.
From this position, the company were aiming to turn their capital revenue towards the launch of 5G services. At that time ( as we know the past what happened for company) next year that is 2022 the Indian government is planning for the 5G spectrum auction.
The capital of VIL is likely to materialise by March 2022 as per their estimation. SBI stated that they are under trials with investors and banks over raise in equity and funds over a couple of years before it.
In the meantime, the parent company of VIL sis Vodafone has filed a tax application for settlement with the Indian government which is a 20,100-crore retrospective tax dispute.
The resolution of the tax issue with the Indian government was only a booster pack left over for vodafone and idea limited management. At that MD and CEO Ravindar Takkar was the person leading the problematic ship. Vodafone and idea has limited resources to tackle the plans of Airtel and Jio.
2023 will be a changing year for the telecommunication industry because there will be real-time usage of 5G services to subscribers. Till that time VIL need to power their capital. In that time company has increased the tariffs up to 25%. They had a loyal postpaid subscribers count of 269 million. Company had a debt of 1.9 lakh crore which includes AGR and spectrum fees.
Telecom companies revenue with Vodafone idea:
Telecom companies were making money from voice services in the past 2015. Till 2016 70% of the telecom revenue is generated through voice services only. But when Jio entered the market where they launched free voice services to their customers. This move made the voice revenues almost 0.
It looks like Vodafone is the smallest company in India but globally Vodafone is one of the highest subscriber firms. Vodafone has a market of over 49 billion euros. Vodafone launched its 5G services in Europe in 2019. Where they have launched it in the UK with over 150 locations and 250 locations in Germany, Italy, Spain, and Ireland.
While coming to India Vodafone and idea has developed a wide range of 5G use cases through the Ericson and Nokia partnership. They are all set to launch 5G services in India.
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