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Is Vodafone going bankrupt?

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Ground Report | New Delhi: Is Vodafone going bankrupt Vodafone-Idea (VI) has a total debt of Rs 1.8 lakh crore including AGR dues, deferred spectrum charges, and bank loans? The company has not reported a single quarterly profit since the merger in 2018, raking in a loss of Rs 73,000 crore last year, more than any Indian firm.

Is Vodafone going bankrupt

Vi has a negative net worth of Rs 44,000 crore and has lost 50 million subscribers since January 2020. The merger of Vodafone Idea was completed in August 2018. Since then, the telecom operator has been bleeding customers. In the last three years, it has lost over 170 million active customers, from around 43 crore customers to 26.

The tariff hike was the solution to the hike, but that too failed only for Vodafone Idea. Despite a 30% tariff hike in December 2019, the company could not register substantial growth in its revenue.

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While KM Birla is willing to give his entire 28% stake in the company to the government, it will still not be enough for a resolution. Also, despite the current position of the company, Vodafone Pick CEO Nick Reeds is not willing to invest any additional funds in India.

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What happens if Vodafone Idea goes bankrupt?
Sources: Capitalmind Analysis

What happens when it is closed? Who benefits?

Let’s say Vodafone gets a red flag and has to leave the field. Its problems are many. To list a few

  • Low cash generation
  • Heavy payment
  • The reluctance of promoters to infuse cash
  • Failed to find a strategic investor
  • Heavy customer loss
  • Weak balance sheet and network
  • Inadequate tariff hike
  • Significant Capital Expenditure Requirement

The telecom sector is heading towards the most monopoly and Bharti Airtel and Reliance Jio will benefit. Vodafone Idea currently has around 247 crore subscribers.

Is there any solution?

Core Pricing: Fixed base price can help save some revenue for companies and eliminate monopolies.

Financial restructuring: Lenders must convert debt into equity to prevent a potential bankruptcy filing. Now, the move may have a negative impact on its already volatile stock price, but it still seems like a better option to eventually write off those dues.

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Interest Waiver: The government may offer a scheme to Vodafone Idea and shop-closing entities to pay the principal amount along with penalty and interest etc.

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