Birla and Vodafone UK should invest more in Vi

The third-largest telecom provider in the nation, Vodafone Idea (Vi), is experiencing a severe liquidity shortage. Due to this, it was unable to invest as much in the 5G airwaves at the spectrum auction as the other telecoms could. Furthermore, Vodafone Idea’s 4G capital is considerably less than what Airtel and Jio are paying. As a result, Airtel and Jio now have the chance to actively reduce Vi’s market share. The government is also pending on converting equity, which is another issue. Everyone understands that if external investors are still interested in the company at this point, they won’t move until the government acquires its ownership in it and things are more certain about how that’s going to work out.

For years, the cash-strapped telco has attempted to collect money, but nothing useful has come of it. The centre now requests further funding from Vi promoters, according to a Livemint report, before it turns the interest payments due into equity for itself. On completion of the equity conversion procedure, the government is anticipated to own around a third of the business. The government now wants the promoters, which include the Aditya Birla Group and Vodafone UK, to invest additional money in the business.

This requirement was previously imposed on the promoters by the government. Vi benefited from the alleviation measures that the Department of Telecommunications (DoT) announced back in September 2021. The company’s problem has been ongoing for more than a year, and it doesn’t appear to be getting any better.

Promoters have been reluctant to invest further in the faltering telecom business. Vi hasn’t recovered in any way, not even with the prior tariff increases. Therefore, it seems sense that the promoters are unwilling to make additional investments. But as of today, the government has imposed this requirement on the promoters, and if it isn’t met, it won’t proceed with the equity conversion.