Vodafone Idea could sink even if given AGR relief, investors fear

Unnamed officials told the Economic Times (ET) today that Vodafone Idea has lost around 20 million subscribers to its competitors in the last two quarters, with company investors reportedly very nervous about Idea’s ability to compete.

 

The company’s subscriber base had reportedly dropped to 291 million at the close of the March quarter, leaving it just 7 million ahead of its rival Bharti Airtel. However, analysts believe Idea may have lost as many as 15 million more subscribers since then, seeing the telco slip into third place on the Indian podium. In fact, Vodafone Idea’s numbers may already be overly optimistic: the regulator’s data suggests that the shift in the hierarchy has already taken place.

 

Naturally, the enormous adjusted gross revenue (AGR) dues imposed on Idea by the government are a factor here, but analysts are suggesting that the company’s future may be in jeopardy even if terms are agreed with the government to allow the telco to pay its dues over 20 years. 

 

“The AGR relief is a separate issue and unconnected with the dim business prospects we face. The business is hanging by a thread," said an official to the ET. “Already the competitors are displaying their heft in the market place.”

 

In order to regain a competitive edge, Idea would need to recapture the lost subscribers, and the only way it can do this would be through fresh investment – something that parent companies Vodafone and Aditya Birla Group have been loath to do for some time now. 

 

However, there may be some light at the end of the tunnel. With Facebook’s major investment in Jio Platforms in the last few months, there has been talk that Google could be looking to invest to break into the Indian telco market. An investment similar in scale to that of Facebook’s would certainly go a long way to relieving Idea’s struggling financial position; however, further details have not emerged over the past month. 

 

The coronavirus pandemic is still growing in India, which may in fact have bought Vodafone Idea a little more time, slowing customer migration. However, without a serious financial boost, it seems unlikely that Idea will be able to hold its own once the country finally returns to normal. India could be inching every closer to the much feared duopoly.