Vodafone Idea Limited’s (VIL) future, until yesterday, was mixed in dark clouds. Things weren’t clear, and the company had failed to secure any new investors. However, with the announcement of the relief package, one thing’s fixed, Vodafone Idea (Vi) is not going to go out of the market, even in the long-term, at least that’s what the evidence suggests. The company’s visibility as a “going concern” has increased with the measures announced by the government. The government said that it will covert a part of differed dues and the interest accrued on them to equity if the telcos’ can’t clear their debt. In the worst-case scenario, if Vodafone Idea can’t clear its dues, it will become a government entity. But at the end of the day, with the new rules, it is ensured that the current market structure won’t be broken. In fact, in the 5G era, India might see new operators being a part of the ecosystem.
Reliance Jio and Bharti Airtel Don’t Have Much to Gain
Reliance Jio and Bharti Airtel don’t have much to gain from the relief package. But the telcos will benefit from the new spectrum norms during the 5G spectrum auction. One thing’s worth noting though, Vodafone Idea’s problems aren’t solved yet. The telco still hasn’t received relief on the bank guarantees of the existing dues. According to a note from ICICI Securities, Vi hasn’t gotten any kind of relief on immediate payments with respect to the spectrum usage charges, and there hasn’t been any adjustment for GST that is pending with the government. ICICI Securities said that VIL might not survive long enough if there are no tariff hikes. This is because even though there are some relief measures in place now, the telco still has other liabilities to meet. The telco has to renew bank guarantees worth Rs 120 billion in the next 12 months and it also has an upcoming NCD payment of Rs 60 billion from December 2021.
