Kumar Mangalam Birla, the Chairman of Aditya Birla Group and telecom company Vodafone Idea (VIL) has thrown in the towel and offered his group’s stakes in the company to any government/public entity (PSU) that can keep the company afloat as debts continue to mount.
Stating that the company was about to reach an irretrievable point of collapse, if not given a hand, Birla wrote a letter to cabinet secretary Rajiv Gauba and lamented, “It is with a sense of duty towards 27 crore Indians connected by Vodafone Idea, I am more than willing to hand over my stake in the company to any entity — public sector/government /domestic financial entity or any other that the government may consider worthy of keeping the company as a going concern,”
If the government does accept the proposal and moves ahead, it would stamp a seal of approval on the prophecy made by TFI, one and a half years ago where former TFI senior Columnist Amit Agrahari had argued that BSNL should ideally tie-up with Vodafone-Idea and ensure that duopoly is not created in the vital sector of the economy. Agrahari’s argument was recently picked up by Deutsche Bank as well and reiterated verbatim.
What TFI thinks today, global financial giants think a year and a half later.
— Atul Mishra (@TheAtulMishra) July 27, 2021
“To save the telecom sector from duopoly which is neither good for the market nor the consumer, the best bet would be ‘to nationalize Vodafone Idea and merge it with BSNL-MTNL. The government has already said that there are no intentions to close down BSNL- despite the 70,000 debt of the company and successive yearly loss- as it is a strategic asset.” Agrahari had stated.
Thank You @TheAtulMishra Sir for the opportunity to explore these ideas.
One good thing about good literature is that it remains there for years, decades, centuries, and sometimes millennia. https://t.co/Wka7ZucQlu
— Amit Agrahari (@amit_agrahari94) July 27, 2021
Vodafone and Idea had joined forces in 2018 to battle against Mukesh Ambani’s Jio but owing to the aggressive capturing of the market by the latter, the united front failed to pay any dividends. According to the latest numbers, as of March 2021, the outstanding debt of the company was estimated to be Rs 1.8 lakh crore.
If the company goes bankrupt, the lenders to the company, most of which are public sector banks, will bear the losses. At present, Vi owes the Department of Telecommunications more than Rs 1.5 lakh crore by way of AGR and deferred spectrum payment dues. And as co-promoters, UK’s Vodafone Group Plc and the Aditya Birla Group of India own 44.39 per cent and 27.66 per cent stakes.
The company stands on the brink of a collapse and the merger would also save the subscribers of Vodafone and Idea, who, otherwise, would have to look for other companies. As India heads for the revolutionary 5G market and given the importance of people’s data in future National security and cyber warfare — having a national player with the largest customer share is a good idea. And the government will have to spend only 16,000-17,000 crore rupees for that, which is less than the public sector’s bank’s exposure to the company.