Vodafone Idea promoters in a fix

Shares of Vodafone Idea traded 1.19% higher Thursday trade even as the promoters of the telecom services provider are worried about dim business prospect.
It’s business is hanging by thread given the sharp erosion in subscriber base amid stiff competition.
Vodafone Idea may have lost another 15 million users in the April-June period, when Jio is expected to have added around 6 million with Airtel maintaining or increasing its subscriber base a tad.
Since the merger in August 2018 when it was the runaway subscriber market leader with 408 million users, the telco has lost 117 million subscribers to close the March quarter with 291 million, compared with 388 million for Jio and 284 million for Airtel. The telecom regulator’s data however puts Vodafone Idea below even Airtel’s subscriber numbers.

The falling numbers have prompted discussions among the promoters around the future of the company, even if the telco was to be allowed by the Supreme Court to pay its adjusted gross revenue (AGR) dues over 20 years. That is because a sharp fall in the number of subscribers would have to be reversed to secure the company’s future. That might need capital infusion by the promoters or other strategic investors and it’s unclear if this will happen.
The promoters of Vodafone Idea, the Aditya Birla Group and Vodafone Group Plc, are finding themselves caught in an uncomfortable situation.

The telco would need a significant capital infusion to be competitive in the market. But the promoters may not be inclined to infuse any more capital, with officials saying that the Aditya Birla Group has other financial challenges to deal with and cannot spare further investments for the bleeding company.
Vodafone Idea has lost about 20 million subscribers to competition in the two quarters to March.
The company reported consolidated sales of Rs 11735.6 crore for the quarter ended 31-Mar-2020, up 5.83% from previous quarter’s Rs 11089.4 crore and up 0.04% from the year-ago quarter’s Rs 11740.6 crore.
The net loss for latest quarter stood at Rs 11643.5 crore, up 138.5 per cent from the corresponding quarter last year.

As of 31-Mar-2020, DIIs held 4.52% stake in the company, while foreign institutional investors held 8.82% and the promoters 18.48%.

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