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Vi facing crisis after crisis

Vodafone Idea’s market share loss is expected to widen from 2 percentage points in 2022, exacerbated by the low CapEx and the lack of 5G rollout caused by fundraising delays and its USD 26 billion government debt burden, says a recent CLSA report.

Vi’s CapEx for January to September 2022 period was Rs 3,260 crore, about 80% below Bharti Airtel’s India spend. “The CapEx lag is unlikely to narrow with the ongoing fundraising delay. Although Vi acquired 3.3GHz/26GHz 5G spectrum (at end 2022), 5G rollout is unlikely,” says CLSA. The aggressive rural market penetration (Vi’s rural market base has declined from 157 million in October 2020, to 136 million in October 2021, and to 121 million in October 2022, in comparison to increase for both Airtel and Jio) ) and delay in rolling out 5G leaves Vi’s high paying customers open for moving to Airtel and Jio. Vi’s postpaid consumers make up 21 million of its current customer base (245.6 million), and 25% of its overall revenue.

Vi’s dues to the government include Rs 18,800 crore toward 5G spectrum acquisition in the 2022 spectrum auctions, Rs 1,36,700 crore in spectrum debt, and Rs 68, 600 crore in adjusted gross revenue (AGR) dues. It continues to struggle with external fund raise which is also leading to delays in equity conversion by the government. The telco has failed to keep up its commitments on the licence fee and SUC payment front. Vi has paid Rs 80 crore as licence fee and Rs 15 crore as SUC for OND2022. This is in comparison to Rs 600-800 crore for licence fee (LF) and Rs 250 crore for SUC in for the previous two quarters. The payment schedule is 8% of AGR as licence fee and 3-4% as SUC.

Is it too large a company to be wiped out? Is this heading for a takeover by the Adani Group? Will the promoters and the govt get together and save the telco? Only time will tell how this pans out.

CT Bureau

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