The Aditya Birla Group and Vodafone Group Plc are alarmed at the sharp erosion in their telecom JV Vodafone Idea’s user base, with the carrier having lost about 20 million subscribers to competition in the two quarters to March , top officials familiar with the matter say. Analysts say that the company may have lost a further 15 million subscribers for the quarter ended June 30.
The falling numbers have prompted discussions among promoters on the future of the telco, even if it were allowed by the Supreme Court to pay its adjusted gross revenue (AGR) dues over 20 years, said one of the officials. Subscriber base erosion would have to be reversed to secure a future.
That might need capital infusion by promoters or strategic investors and it’s unclear if this will happen. “AGR relief is a separate issue and unconnected with the dim business prospects we face. The business is hanging by a thread,” said another official. “Already, competitors are displaying their heft in the marketplace.”
Axis Capital expects loss-making Vodafone Idea to have lost another 15 million users in April-June, during which Jio is expected to have added around 6 million with Airtel maintaining or increasing its subscriber base a tad. Analysts say under-investment in network and aggressive rivals in Reliance Jio and Bharti Airtel are weaning away subscribers from Vodafone Idea.
Since the merger in August 2018, when it was the runaway subscriber market leader with 408 million users, the telco has lost 117 million to close the March quarter with 291 million, compared with 388 million for Jio and 284 million for Airtel. The telecom regulator’s data, however, puts Vodafone Idea below even Airtel’s subscriber numbers.
Analysts, however, say that even if Vodafone Idea were allowed to pay AGR over 20 years, the telco would need a significant capital infusion to be competitive in the market. But the promoters may not be inclined to infuse any more capital, with officials saying the Aditya Birla Group has other financial challenges to deal with and cannot spare more for the bleeding telco.
Vodafone Group has been paying parts of the some ₹8,000 crore the JV partners had agreed to, as per a contingent liability mechanism. The UK-based telecom major, which needs to pay on set dates, is set to inject another 35 million (₹285 crore) by September.
Also, there have been no progress on talks for fresh infusion from external investors, the official said. Late May, Financial Times reported Google was exploring an investment in Vodafone Idea, while there has also been unconfirmed speculation about similar interest from Amazon.
In a bid to rationalise costs amid growing losses, the telco, having completed integration in 92% of India’s districts, is also letting go of employees post bunching its 22 circles into 10 clusters, one of the people quoted above said.
Birla group, Vodafone Group and VIL declined to comment to ET’s specific queries.
