Telecom News: Will Vodafone-Idea take over from India?

Telecom News
Credit: India Today

Telecom News: Vodafone-India, one of the largest telecom companies in India, reported a loss of a record Rs 74,000 crore in the second quarter, adding to the apprehensions over the state of the telecom industry.


What is the reason for the loss in such a big market?

India is one of the largest telecom markets in the world with over one billion mobile subscribers. Despite this, there are two reasons for the loss that the company is suffering.

The first is that when the prices of telephone calls fell for many years, the prices of its data remained consistently high.

But three years ago when Reliance Jio came, everything changed. With the arrival of Jio, the prices of data dropped drastically and this changed the voice market into the data market.

The result was that India became the cheapest country in the world in terms of data.

But at the same time it affected the companies already present in the Indian market. They had to bring their plans according to the prices of Reliance. Due to this, either their profit was reduced or loss was lost.
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Credit: The Economic Times

The second reason is more important. 

This is the case of adjusted gross revenue (AGR). This means that telecom companies will have to share a part of their earnings with the government's Department of Telecommunications.

However, there have been differences between the telecom companies and the government since 2005 on the definition of AGR. Companies want only revenue from telecom to be added to it, but the government had a much broader definition of AGR. She also wanted to include non-telecom revenue such as interest earned on deposits and sale of assets.

Now recently the Supreme Court has decided in favor of the government, which means that the telecom companies will pay Rs 83,000 crore to the government.

Of this, Vodafone India alone has a share of Rs 40,000 crore.

This new fee means that the loss already suffered by the company has become bigger now.
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Credit: The Indian Express

Will Vodafone really leave India?

Now first of all, the question arises that from where will companies get this much money? And the same question is being asked by all telecom companies.

Earlier this week, Vodafone CEO Nick Reid warned that if the government does not stop imposing heavy tax and duty burden on the telecom operators, then the future of the company in India could come under threat.

Vodafone started a joint venture with Idea in India, now it is known as Vodafone-Idea here. In the Indian telecom market, its share is 29% in terms of revenue.

But a day later, he apologized to the government and said that the company has no plans to get out of India.

But the fact is that despite this apology, the biggest issue is that Vodafone has shown zero value of its investment in India. It is also discussed that neither Vodafone nor Aditya Birla Group is keen on investing more in Vodafone-Idea.

So until the owners of the company reverse this trend and do not invest more in India, the possibility of them consolidating business from the Indian market becomes stronger.