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Despite its warnings about a departure from the Indian market, Vodafone Idea looks set to remain in the country.
May 28, 2020
For months, Vodafone Idea has warned that it may be forced to quit India unless there is some relief from government authorities. Yet the operator now seems likely to stay in the country despite the unfavorable circumstances.
Vodafone and Idea, the parent companies of the joint venture, have both flagged their inability to continue operating in India unless authorities offer relief on licensing payments owed to authorities. Their Indian business was more badly hit than its rivals by the Supreme Court judgment on license fees last year and owed about $4 billion in total dues. Although it has cleared some of these, it has failed to receive any help from Indian authorities, despite its pleas. (See Can Vodafone Idea survive in India? and Vodafone's never-ending Indian agony.)
Possibly the biggest indicator of Vodafone's India plan is that it continues to make payments to the Indian government to clear its dues. Vodafone Group, moreover, recently made a $200 million contribution to Vodafone Idea for payments due in September. This should help the company to manage its operations during the COVID-19 pandemic.
Apart from licensing woes, Vodafone Idea is facing stiff competition from Jio and Airtel, its two big rivals, and its financial situation means it is unable to put up a strong fight. The recent investments in Jio by Facebook and private equity firms, including Vista, Silver Lake, General Atlantic and KKR, will not help.
However, several recent events suggest Vodafone Idea intends to remain in the country, even in the absence of any relief from the government. For one thing, it has recently restructured its operations, moving away from a structure based on circles (service areas) to one that comprises ten "clusters." This new approach should allow it to reduce its operational and employee expenses.
Vodafone Idea also recently announced the installation of more than 2,000 massive MIMO (multiple input, multiple output) sites, helping it to address a surge in data demand as people were forced to stay indoors to prevent the spread of coronavirus. In addition, the operator has expanded its deployments of open RAN technology in India and expects to complete the integration of the Vodafone India and Idea Cellular networks next month.
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All these are signs that Vodafone Idea is not done with India just yet. What's more, India's government may be keen to offer incentives to the operator to prevent it from exiting the market. The departure of a major telco would reflect poorly on India and might affect future foreign investments in the country.
Even so, while the company might have decided to stay on in India, it may struggle to survive. It will have to stem the subscriber exodus that has seen customer numbers fall from 415 million at the end of January 2019 to 328 million a year later. Vodafone Idea recorded a loss of 64.5 billion Indian rupees ($852.8 million) in the December-ending quarter.
Furthermore, the operator's 4G license is up for renewal in a few circles, which means it will need to participate in the upcoming spectrum auction, requiring more funds.
While Vodafone Group might have contributed $200 million for now, Vodafone Group CEO Nick Read has said that his business "will not inject new equity into our Indian joint venture." The operator needs a good plan if it is to bounce back.
— Gagandeep Kaur, contributing editor, special to Light Reading
Read more about:Asia
With more than a decade of experience, Gagandeep Kaur Sodhi has worked for the most prominent Indian communications industry publications including Dataquest, Business Standard, The Times of India, and Voice&Data, as well as for Light Reading. Delhi-based Kaur, who has knowledge of and covers a broad range of telecom industry developments, regularly interacts with the senior management of companies in India's telecom sector and has been directly responsible for delegate and speaker acquisition for prominent events such as Mobile Broadband Summit, 4G World India, and Next Generation Packet Transport Network.
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