Vodafone-Idea In Dire Need For Government Support And More Investment; Here's Why

The survival of Vodafone-Idea has become a big issue in the telecom industry. The telecom operator is under deep financial crisis and looking for Government support on the AGR payments and floor pricing rules. Notably, Vi has recently posted a loss of Rs. 7,022.8 crores in the last quarter of the last financial year.

Vodafone-Idea Needs Additional Investment

In addition, analysts believe that the telecom operator needs a minimum investment of Rs. 70,000 crores to come out from the deep financial crisis and for survival.

"Vi will need to raise around Rs. 70,000 crores in equity or increase its average revenue per user (ARPU) to around Rs 200 to get out of the woods, or some combination of the two," brokerage Deutsche Bank said.

The firm said that the telco needs cost relief and equity close to Rs. 1 trillion. Besides, the German investment bank also believes the Government will take enough steps to help the Vi alive.

"The government needs to show it is supportive, providing substantial relief before investors follow, and AGR recalculation and/or floor pricing seem critical developments," said Deutsche Bank.

Vodafone-Idea Fund Raising Plans

Notably, Vodafone-Idea is planning to raise Rs. 25,000 crores to expand its network operations in the country. However, nothing has been finalized yet despite having several internal discussions with investors.

The telecom operator has also written a letter to telecom secretary Anshu Prakash to inform the health of the sector. The company also mentioned the floor pricing regulation as it can solve the issue of predatory pricing.

Additionally, the telecom operator said that it needs another year to pay the spectrum dues worth Rs. 8,292 crores as it is unable to generate enough cash. The firm also pointed out that AGR payments are creating a problem for its liquidity.

It is worth mentioning that Vi wants to increase prices, but does not want to do it alone as Reliance Jio is all set to bring a new smartphone to the country. This might affect Airtel and Vodafone-Idea's market share as the ultra-affordable smartphone is designed for 2G users and first-time buyers, which is why there are high chances that Jio might attract their users easily.