Vodafone Idea must stop seeking waivers from government and courts

Vi must urgently raise capital

Vodafone Idea (Vi) has found itself in a corner once again after the Supreme Court rejected its plea on the waiver of dues linked to adjusted gross revenue. Terming the petitions by Vi, Bharti Airtel, and Tata Teleservices “misconceived,” the apex court dismissed them, while stating that the government was free to help the telcos. Among the three telcos, only Vi has an uncertain future. While Bharti Airtel’s January-March quarter results showed strong revenue and profit growth, Tata Teleservices caters for only the enterprise segment, having exited the mainstay consumer telecom business some time ago.         

 

Even as the Supreme Court has said it will not come in the way of the Centre offering any relief, it’s time for Vi to stop seeking waivers and help from the government and courts. Vi opted for converting its debt into government equity in several tranches through the relief package approved by the Union Cabinet in 2021. At present, the government holds close to 50 per cent in the telco, and any further equity conversion would, by definition, make Vi a public-sector undertaking (PSU). This certainly is not the path that the government is keen on. Nor should Vi get into such an arrangement with the government, which already has the onerous responsibility of running Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL) — two PSUs that have over the years faced value erosion and lost subscribers. 

 

Rather than looking for government support or moving court for relief, Vi should now put its house in order by raising funds. Last April, it had raised ₹18,000 crore in a follow-on public offer. A few months later, one of its promoters — United Kingdom-based Vodafone — pumped in close to ₹2,000 crore. This was after Vodafone sold its residual stake in Indus Towers. Vi requires much more robust funding not just to keep afloat but offer quality telecom services to its customers. The idea of just preventing a duopoly situation theoretically is increasingly losing credence, especially at a time when the next level of technology is always round the corner. Recently, the government issued draft rules to delicense the lower end of the 6GHz spectrum band — a move that’s expected to benefit WiFi expansion. The promise of high-speed connectivity through 6GHz — the largest block of unused spectrum so far — would surely dominate the telecom discourse for some time. Satellite broadband service is also expected to be launched soon, adding another layer to competition in the telecom space.

 

Against the given backdrop, India needs telecom operators that can play a strong and vibrant role in meeting the country’s digital aspirations while serving subscribers across a wide range of offers. It is important for India to have more than two private telcos, but the third player must raise the bar and get its place back in an industry known for genuine competition. Vi recently said it would not be able to survive beyond 2025-26 without relief. Now that its petition has been dismissed, the ball is in the court of the company’s promoters to think about how to revive the business and make meaningful investment rather than getting a temporary lifeline from the government or the judiciary.