Vodafone sees no remaining value in Indian operation

vodafone idea logo

Vodafone now values its investment in its troubled Indian operations at zero and warns that the outfit is in need of more cash from its lenders.

The revelation came on Tuesday in the telecoms group’s full-year results announcement, but funnily enough was overshadowed by the news of that much-needed turnaround plan and its 11,000 job cuts in Europe. As the dust settles on that, we’re able to take a closer look at Vodafone’s various operations, including that problematic Indian provider Vodafone Idea, or Vi.

Put simply, Vodafone seems to be backing away from Vi. The business needs more money, that Vodafone is certainly not willing to provide, and that zero valuation indicates that it will put no more effort into saving it.

“VIL [Vodafone Idea Ltd] remains in need of additional liquidity support from its lenders and intends to raise additional funding. There are significant uncertainties in relation to VIL’s ability to make payments in relation to any remaining liabilities covered by the mechanism and no further cash payments are considered probable from the Group as at 31 March 2023,” Vodafone said, in the notes to its consolidated financial statements for the 2023 financial year.

The mechanism it refers to is that which formed part of the 2017 merger agreement that brought together Vodafone’s Indian mobile operation with Aditya Birla Group-owned Idea Cellular. Essentially, it’s a financial mechanism that covers payments between Vodafone Group and Vi. Vodafone notes that its potential exposure under that mechanism is capped at 64 billion rupees (€719 million), but, as the above statement indicates, Vi can’t pay its dues, and Vodafone won’t shell out any more.

“The carrying value of the Group’s investment in VIL is €nil and the Group is recording no further share of losses in respect of VIL. The Group’s potential exposure to liabilities within VIL is capped by the mechanism described above; consequently, contingent liabilities arising from litigation in India concerning operations of Vodafone India are not reported,” Vodafone said.

Despite some significant efforts to save it, Vi remains in some trouble.

The Indian government became Vi’s single biggest shareholder earlier this year as part of what was essentially a financial bailout package. The state converted INR161.3 billion ($1.95 billion) worth of interest Vi owed on spectrum and other licence fees into equity, giving it a 33% stake in the telco. The plan was agreed as long ago as 2021, but delays ensued as the government sought to pressure Vodafone and Aditya Birla to plough more money into Vi, and therefore took until February this year to draw to a close.

It appeared then – just a few months ago – that Vi’s founder shareholders would continue to back the beleaguered telco. Now, that seems less likely.

Vi is still shedding customers. In February it lost more than 2 million customers, according to the latest data from the Telecom Regulatory Authority of India (TRAI), giving it a base of just under 238 million and a market share of 21%. Leader Reliance Jio serves 37% of the market and Bharti Airtel 32%, and – crucially – both players are working hard to expand 5G services, while Vi has yet to announce any firm plans even to launch the technology.

The future looks pretty bleak for Vi.

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  1. Avatar Professor Peter Curwen 17/05/2023 @ 4:49 pm

    It has been obvious for a long time that Vi has no future, which is extraordinary given that not so long ago there were almost 10 operators. But Reliance Jio has singlehandedly reduced the sector to an effective duopoly by the simple expedient of taking massive losses up-front to gain market share. One must conclude that the Indian government and the multitude of regulators have been incompetent at best to brng about such an outcome in such a massive market – can you imagine the same scenario in the USA?

  2. Avatar Percy Mistry 18/05/2023 @ 5:08 pm

    Vi has been the victim of regulatory discrimination in favour of Jio to try and make it a monopoly. It shows why foreign investors should be extremely wary of investing in India. Unless foreign investors are tied in some way to favoured Modi crony capitalists like Adani and Ambani, they are wasting their time

  3. Avatar Samit Chakraborty 19/05/2023 @ 3:26 am

    US cudnt do much to stop the big techs from Apple to Amazon to Google to Meta…..So please update ur info…further US has effectively 3 operators….. and govt is reviving Bsnl and Bsnl is launching 4G…which can easily be upgraded to 5G…

  4. Avatar Joydev 19/05/2023 @ 7:21 am

    It’s just business not cheap products to create market share is common.thats how Rothschild, Vanderbilt,jp Morgan, Rockefeller, Carnegie make their fortunes in USA. But first you have to make connections with political power before you do that and Ambani’s have that with modi government.its a very old play book of business.

  5. Avatar Subhajit Ghosh 19/05/2023 @ 10:26 am

    It’s simple. Vi was incompetent in telecom business when compare with jio or Airtel. Also they already had problems and lot of debt before jio came which prevented them from experimenting with new ideas. Anyway so far in India we Indians have benefited from this telecom revolution by jio (and later Airtel) , be it access to cheap internet or cheap broadband connection, even 5g penetration growth rate in India is one of the highest with most cities covered under 5g till now(may,2023). Interestingly so far this duopoly is blessing for us.(only negative side is we can’t have multiple SIM and use them with a very low top up…now we have to top-up with a 28day unlimited 1gb/day internet plan at minimum)

  6. Avatar Riya Paul 19/05/2023 @ 3:45 pm

    I must say even vi don’t provide it 5g it’s have good plans like hero unlimited packages. I don’t think anyone in India who is normal will buy new 5g mobile just to use 5g data when 5g still have lot of problems. And 4g is stable at least even in 19 may 2023 today i am writing this.
    Vi hero unlimited packages give you a lot of benefits like my favourite features are data rollout and binge night data also give 2gb data every month if you need extra data by chance in day time. I use both jio then Airtel after i started using vi i am in love sometimes it’s have network problem but even jio and Airtel have those problems so they are same on this issue.

    My whole family now use vi hero unlimited packages we always say outside of home so wifi connection is useless for us. I believe vi have better value for money plans then jio and Airtel. I also think BSNL is good too if you have network in your place.

  7. Avatar NARAHARI 20/05/2023 @ 6:05 am

    Vi doing good nowadays

  8. Avatar Vedashree 23/05/2023 @ 7:33 am

    Vodafone’s latest financial report reveals troubling news for its investment in Vodafone Idea, the Indian telecom operator. Vodafone now considers its investment in Vi to be worth nothing and has no plans to provide any additional financial support. This situation raises serious concerns about Vi’s future as it requires more funds and struggles to make payments. Meanwhile, Vi’s competitors, Reliance Jio and Bharti Airtel, are actively growing their services, including the expansion of 5G technology. Unfortunately, the outlook for Vi appears quite grim at the moment

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