News
“No such proposal is under consideration in the Department,” according to communications minister Devusinh Chauhan
Indian telco Vodafone Idea (Vi) has had a bumpy road in 2023. Many years of intense price wars, caused by the disruptive launch of Reliance Jio back in 2016, has left the company languishing in debt and scrabbling for market share – with little prospect of improvement.
In fact, for the past four years, the company has spent much of its time arguing with the government over the $2.2 billion in adjusted gross revenue (AGR) debts that the company owes the state. With Vi’s parent companies, Vodafone and Aditya Birla Group, repeatedly refusing to infuse the business with fresh capital, these debts threatened to sink the already struggling telco, potentially turning the market into a duopoly of Reliance Jio and Bharti Airtel.
To avoid this, in February this year the government agreed to convert the telco’s $2.2 billion of accrued interest towards ARG arrears into equity, giving the state a 33.1% stake in the business.
At the time, it was hoped that this move would help shore up Vi’s financial situation and potentially entice fresh investment. Since then, however, additional investment has been slow to appear.
In fact, in August, analysts had already began discussing the possibility that the government would convert even more of Vi’s debts into equity when the related four-year moratorium expired, potentially taking a stake of over 70% in the business.
“We believe that significant external equity infusion may be unlikely considering the potential significant dilution once the moratorium is lifted,” IIFL Securities shared in a note.
Now, some months on, the government has decided to clarify its position, saying it has no intention of taking such a large stake in the business.
“No such proposal is under consideration in the Department,” said communications minister Devusinh Chauhan earlier this week.
The minister further explained that the government’s decision to take its initial stake in Vi was purely to help keep the business afloat and promote competition within the country’s telecoms sector.
Whether this measure will be enough, however, remains to be seen. External investment in Vi, both related to debt and equity, has been slow to materialise.
In November, reports suggested the company had secured a $240 million loan from HDFC Bank, with the funds quickly used to pay off the company’s license fees and spectrum usage charges. Beyond this, discussions have reportedly been ongoing with numerous potential investors, with the operators seemingly hopeful to close at least some of these deals in Q1 next year.
But, with Jio and Airtel racing ahead with their 5G rollouts, these funding delays could be costing Vi a significant competitive advantage.
Want to keep up to date with all of the latest international telecoms news? Sign up for Total Telecom’s daily newsletter
Also in the news:
It’s time for action: COP28 and keeping 1.5°C alive
Mitratel snaps up 803 telecoms towers for $113m
Sateliot partners with t42 to sign 5G IoT Maritime deal
