“Get an Idea” of what will happen if Vodafone departs from India

Because of Vodafone AGR Dues economy will go down, Predictable 5G Auction, Duopoly of Jio & Airtel

Back in 2017, when Vodafone was rebranding in India, it came up with a tagline, “The future is exciting. Ready?” Little did the company know what the future held for them. In 2018, Vodafone joined hands with India’s Idea Cellular to form Vodafone Idea Limited. Company, like others, was already struggling hard against Reliance Jio, when Supreme Court came up with a verdict on Adjusted Gross Revenue, AGR. The decision went in favour of the government, meaning these telecom companies owed 92,000 crores to the government.

The worst hit company by this decision was Vodafone Idea. Its AGR dues over the years are Rs 57,000 crores and to add to its woes, the company reported its highest recorded quarterly loss of 50,921 crores, thus managing to pay only 3,500 crores towards its AGR dues. With government providing no relief whatsoever, it won’t be completely wrong to speculate that company may go down bankruptcy path, leaving Vodafone with no choice but to make an exit. Let’s see what will happen if Vodafone leaves India.

  1. Economy – The debt defaults, loans from banks and job losses will take a heavy toll on India’s already sluggish economy. State Bank of India has already expressed its concern saying that the banks will have to pay the price if any telecom company shuts down.
  2. Reputation – Vodafone’s exit will tarnish India’s image as a place for multinationals to invest. It will make the situation, for the bleeding telecom sector, worse and weaken the economy further.
  3. Duopoly – With Vodafone’s departure, India’s telecom sector will be headed towards a duopoly market between Bharti Airtel and Reliance Jio as BSNL and MTNL are in no shape to compete. This sector has evolved from monopoly to duopoly to this competitive structure that we have today. Going back will neither be good for the industry nor the consumers.
  4. 5G auction – 5G airwaves auction is anticipated to be happening soon in India. But with only two telecom companies standing any real chance, the auction will be less interesting and more predictable.

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