India’s Vodafone Idea to shut down 3G network

Vodafone Idea, India's third-largest service provider, plans to shut down its 3G network later in 2021.

The company has around 11 million 3G subscribers, and moving them to a 4G network will help the company enhance its revenue. This is crucial for Vodafone Idea as it struggles to clear its debt and move into profit.

However, in line with Bharti Airtel's strategy, Vodafone Idea also plans to keep the 2G network running as almost 50% (149 million) of its subscribers are still on the 2G network. The 2G network can also be used for some Internet of Things (IoT) services.

Forward planning: By moving 3G subscribers onto 4G Vodafone Idea hopes to cut debt and keep the shutters open.  (Source: Arti Sandhu on Flickr CC 2.0)
Forward planning: By moving 3G subscribers onto 4G Vodafone Idea hopes to cut debt and keep the shutters open.
(Source: Arti Sandhu on Flickr CC 2.0)

India's largest telco and its only pure-play 4G service provider, Reliance Jio, has been campaigning for a 2G-mukht India (2G free India), so incumbent telcos are under pressure to move their 2G and 3G subscribers to 4G.

This is especially pertinent as Jio is planning to revive its JioPhone, and will also launch a low-cost device in collaboration with Google.

Follow the money

The company continues to struggle to record profit. It urgently needs to acquire funds to clear off dues and invest in network modernization.

Vodafone Idea recorded a loss of INR45.4 billion (US$623 million) in the quarter ending December 2020. At the same time, it narrowed losses compared with INR72 billion ($989.5 million) in the previous quarter.

Vodafone Idea's capex of INR9.7 billion ($133.2 million) is significantly less than its closest competitor's Airtel's capex of INR42 billion ($576.67 million). The company has identified 16 circles (service areas) which require a network upgrade.

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Investment in the network is especially important, as it continues to face high network churn.

More subscribers may exit when other players launch 5G services. Jio and Airtel have been highlighting their 5G network readiness, and there is a strong possibility it will launch later this year. The company might be forced to hike tariffs to enhance earnings.

It is aggressively trying to generate INR250 billion ($3.4 billion) to invest in network modernization as it continues to lose subscribers. Vodafone Idea also needs funds to clear its Aggregate Gross Revenue (AGR) dues, upgrade the network and invest in the forthcoming spectrum auction.

Media reports suggest that the company is in talks with a consortium of investors led by Oak Hill Advisors for an investment of around $2 billion.

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— Gagandeep Kaur, contributing editor, special to Light Reading

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