Vodafone poser for govt: It’s a ticking time bomb
Aletter written by Kumara Mangalam Birla, chairman of Vodafone Idea Ltd, to the Cabinet Secretary (in June) offering his 27.66 per cent stake for free to the government brings out into the open the festering problem within the Indian telecom market. The third biggest telecom operator, with a market share of 270 million customers, close to a quarter of India’s telecom users, is stressed with dues to the government in excess of
`50,000 crore in AGR (Adjusted Gross Revenue) alone.
The company’s gross debt is above `1.8 lakh crore, half of which is owed to deferred spectrum payment obligations and about `23,000 crore to banks and financial institutions. The British partner Vodafone is unwilling to invest any more money into the bleeding venture that may need an injection of at least
`25,000 crores to be viable even as the operator faces the prospect of millions of its customers migrating to one of two giants, Reliance Jio or Bharti Airtel.
If Vodafone Idea is allowed to run into the ground — its sliding market cap is a bad sign — a virtual duopoly will be left, which will not be in the interest of an open market of close to a billion users. The government has to step in to resolve the crisis lest the problem of debt spell more write-offs to the banking sector besides the Centre itself foregoing anticipated spectrum collection due from days when a hyper competitive telecom sector overbid for spectrum jeopardising the fundamentals of operational finances.
The country has come a long way from the days of BSNL monopoly in landlines with open market forces swinging in a couple of decades totally in favour of the customer who not only gets good connectivity and service but also at economical prices, including reliable Internet access that truly brought Indian mobile telephony on par with services running globally.
The simplest solution might appear to be for the government to put together a relief package or extend the moratorium on spectrum payments but that cannot be for just one operator. It is better that any call on how to handle the period of deferred payments is taken earlier because the crisis has crossed the doorstep. If Vodafone goes bankrupt, other players may not be interested in a market without a floor pricing regime above the cost of service.
As the common man as well as large and small businesses are being empowered by access to public services as well as IoT and other sophisticated offerings through the Internet, sustaining a fair telecom market is also in the interest of the nation. The 4G network now serves close to 98 per cent of the population and 5G is nearer the operational horizon with India on the cusp of making available the latest technology to all its people. The fate of MTNL and BSNL, with about 10 per cent market share, is also up in the air, which means that the time to act is now rather than allow the problem to build into a crisis affecting banking profits, government revenues and fair access to mobile telephony of a billion Indians.
If Vodafone Idea is allowed to run into
the ground — its sliding market cap
is a bad sign — a virtual duopoly will
be left, not in the interest of an open market of close to a
billion users