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Is Vodafone idea going bankrupt?




As we known after the launch of JIO telecom industry has been boost up 3X time in the past 2 year.
As new competitor arrived prize of data plan reduced 80%.

The Indian government liberalised the telecom sector as per the National Telecom Policy in 1994, under which licences were given in accordance to the Indian Telegraph Act, 1885. Under this century-old law, telcos are required to pay a fixed annual licence fee for licences granted to them. Since fixed licence fee was high, telcos often defaulted on their payments. The government in 1999 announced the National Telecom Policy, which gave these companies an option to migrate from fixed licence fee to revenue sharing fee. As per the new policy, 15 per cent AGR was fixed as a licence fee under the revenue-sharing model, which was later reduced to 13 per cent and then 8 per cent in 2013.

Telecom companies owe Rs 1.47 lakh crore to the DoT, including Rs 92,600 crore as licence fee and Rs 55,100 crore as spectrum usage charges. Bharti Airtel owes Rs 35,600 crore, while Vodafone Idea has to pay Rs 53,000 crore. Reliance Communication has pending dues worth Rs 21,200 crore and Tata Group has to pay Rs 13,800 crore. Of the total pending amount, Vodafone Idea and Airtel have to pay Rs 88,600 crore.


WHY BANKRUPTCY APPEARS INEVITABLE


Amongst the three private telcos, Vodafone Idea is in the worst situation. Its net losses for the September quarter stood at a record Rs 50,922 crore whereas Airtel is far better. Mukesh Ambani-led Jio, which is in a much better position than its two rivals, posted net profits of Rs 990 crore in the September quarter. Vodafone Idea has been posting net losses for the past three consecutive years that have eroded its net worth and cash balance.

Lack of interest from parent companies - Both Aditya Birla Group and Vodafone have reportedly indicated that they are not interested in investing more into the merged entity if no help comes from the government. In the absence of any financial support from parents, and with the kind of losses that the telco is making, it would be nearly impossible for it to continue operations for long, and might soon file for insolvency.

What happens if Vodafone Idea gets bankrupt?

Lesser competition - Vodafone Idea going down would mean that there will be lesser competition in the market that has already shrunk to a five-player market - out of which two are sick units (BSNL and MTNL). Lesser number of operators vying for the market share would also result in weakening of the checks and balances that the competition brings in. It's also possible that mobile tariffs would go up once the remaining operators add more subscribers migrating from Vodafone Idea. Jio is supposedly waiting to reach 500 million subscribers before it considers tariff hikes. That target could be achieved faster if Vodafone Idea files for bankruptcy.


Job losses - In an economy where job creation is a challenging task, it would be tragic if people lose jobs. Vodafone Idea employs about 10,000 people directly, and the number of indirect employment would be roughly two-three times of that number. The sector has already seen large-scale job losses over the past three years. Industry lobby body COAI estimates that 50,000 jobs have been lost in the past three years owing to heightened competition, disruption caused by Jio, and consolidation in the sector.

According to a recent research report by Motilal Oswal Financial Services (MOFSL), Vodafone-Idea has gross debt of Rs 1.2 trillion, of which around Rs 900 billion is government’s deferred spectrum debt, while around Rs 250 billion is bank debt. Vodafone-Idea has 13,500 employees, in addition to multiple vendors and other stakeholders. Hence, payment defaults can have a direct impact on the Indian economy.



In Conclusion: Vodafone should will and should not get bankrupt because at the end its going to affect the people of the country, they are one who are using the telecom service and if less will be the competition then people while have to pay more money for the service.


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