Vodafone Idea's Exit To Leave India's Telecom In Two-Party Hegemony

By CIOReviewIndia Team | Tuesday, 18 February 2020, 09:20 IST

Vodafone Idea’s Exit To Leave India’s Telecom In Two-Party HegemonyAs the government asks Vodafone Idea to repay the unpaid dues, the telecom operator faces severe uncertainty over the future. The situation has arisen following the Supreme Court’s rejection of plea by Vodafone Idea seeking more time to pay the adjusted gross revenue dues. The apex court has recently ordered telecom operators in the country to pay off their due by the end of March 17, 2020. Of all, the most hit is Vodafone Idea which owes over INR 50,000 crore to the government. “Vodafone Idea has made a loss of over 2 lakh crores over the last decade and will have to shut shop if it has to pay all its dues to the government overnight. This would make 10,000 people jobless and cause inconvenience for 30 crore subscribers. It would also have an effect on the whole telecom sector, wiping out the competition and leaving only two players,” said Mukul Rohatgi, the senior counsel for Vodafone Idea. The exit may also have adverse effect on the economy of the country that is already facing a steady downfall in growth rate.           

Government May Consider Selling Spectrum at Huge Discounts

Vodafone Idea, a joint venture between Aditya Birla Group owned Idea Cellular and Vodafone Group Plc has been incurring huge losses like other telecom operators in the country after the advent Reliance Jio which is backed by Mukesh Ambani who is Asia’s richest man. If the situation gets further worsen and result in the closure of Vodafone Idea, the Indian telecom sector would be left with only two players Bharati Airtel and Reliance Jio, creating a semi-monopoly in the telecom industry. Though Airtel and Jio are seen as the biggest beneficiaries if Vodafone Idea quits from the competition, this might also result in the increase of the opex and capex for them. If VIL is pushed to bankruptcy then India becomes India becomes a two-player telecom market, and due to a reversal of current tower sharing agreements between the telecom operators opex of Airtel may increase by 15 to 20 percent along with capex in the near future, as per the BofA Securities. If the exit of Vodafone Idea happens, the government will be bargained to auction VIL’s spectrum at lower relatively prices to balance the situation, also the government is keen to sell the company’s share of the spectrum at huge discounts to maintain optimum tele-density levels in the country. 

Don't Miss ( 1-5 of 25 )