[avishar]

Today the Vodafone Idea Limited announced their Q2 results, and it definitely was not for the faint of heart. They posted a loss of Rs 50,992 crore!, the highest ever seen in corporate India. The second position goes to Tata Motors, when it had announced a loss of Rs 26,971 crores a year back. In both the cases, the massive amount is partly due to one-off payments, in Vodafone’s case a provision of Rs 25,952 crore to pay for their share of the Adjusted Gross Revenue as directed by the Supreme Court.

What is interesting is that Vodafone Idea is actually profitable at an operating level, since they reported a revenue of Rs 10,840 crore for the quarter and an operating profit of Rs 3371 crore. But like some of our salaries, it immediately evaporates when paying tax and EMIs!

Some of their big payments for the quarter were:

1. Depreciation and Amortization : Rs 6,309 crore
2. Interest and Financing cost: Rs 3351 crore
3. Tax expense: Rs 13,962 crore


This is before the eye-watering amount of money that they had to account as impairment and exceptional items.

Looking at their cash reserves, Vodafone Idea is in a tough spot. Considering that they are atleast profitable at the ridiculously low ARPU (Average Revenue Per User) that the industry generates, I wonder if they can survive if given a relief from the AGR dues?

All information regarding their finances taken from their Quaterly results release

https://www.vodafoneidea.com/content...0QR_Q2FY20.pdf

[Durango Dude]

I've heard from my kids that Vodafone "may" exit India. I want to know if that's true. Wow! That's a resounding loss to assimilate! My main number is Vodafone and have Jio also like every one else.

[GrammarNazi]

Originally Posted by avishar

....What is interesting is that Vodafone Idea is actually profitable at an operating level, since they reported a revenue of Rs 10,840 crore for the quarter and an operating profit of Rs 3371 crore. But like some of our salaries, it immediately evaporates when paying tax and EMIs!...

This part is key IMO. If their one time penalty is paid off, they can continue to function with a healthy operating profit which they could use to recover from their positions within a very reasonable time frame, given that the Indian market is anything but small. I don't mean to be contemptuous, but I do have doubts they would really want to exit to another country of a billion people anxiously waiting to subscribe to Vodafone.

[GTO]

Don't know what's happening up there, but at the ground level as a customer, I can tell you that Vodafone's network SUCKS in Bombay. I have seen it steadily deteriorate over the last 2 years and it's clear they aren't making any investments in infrastructure here.

A nice summary from the Times Of India newsletter:

What's the issue? On October 24, the SC backed DoT's definition of revenue on which it calculated levies on telecom companies. Called adjusted gross revenue (AGR), DoT argued it, besides a company's core revenue from telecom operations, it should include non-core revenues (rent, dividend and such) as well. Telcos objected. But SC backed DoT, which said Vodafone Idea owes it ₹28,308 crore; Bharti Airtel ₹21,682.13 crore; BSNL ₹2,098.72 crore, and MTNL ₹2,537.48 crore. Reliance Jio owes a modest ₹13 as its a new player.

A hard blow: Since the entry of Reliance Jio and the price war it triggered, the telecom industry has been on a turmoil. On Thursday, Vodafone Idea recorded India's biggest ever quarterly loss of Rs 50,921 crore for the quarter ended September 30; its gross debt stood at Rs 1,17,300 crore. Bharti Airtel posted a net loss of Rs 23,044 crore and a net debt of Rs 1,18,106.5 crore.

Future tense: Then there is the upcoming 5G spectrum auction, for which the government has set a base price of Rs 5.7 trillion. Industry body Cellular Operators' Association of India says "older telcos unlikely to bid". That's everyone except Reliance Jio.

[sansvk]

India is too large a market to have just two private players and one defunct PSU. As a standalone firm, Jio itself has huge debt of 1L+ crore. None if them are making money and government is using this sector as a cash cow. Imagine what would happen if we are left with one large private player.

[2000rpm]

I am sad at the kind of treatment government is giving to Telcos. The amount of investment required in the sector is huge. This is while they are seeing financially imprudent start-ups blow-up investor money.

Telecom was a core sector when BSNL and MTNL were the players. In a duo poly, Jio and Airtel will milk customers. I seriously doubt the ethics of Jio and their business strategy.

If tariffs start to increase, the Indian digitization dream will go away. Any price rises from current levels will see drop is usage of digital payments, learning, content consumption, etc. This will have a cascading impact on many emerging sectors. Including the VC funded start-ups which heavily depend of internet.

[Sebring]

Airtel and Vodafone have together said the business is no longer feasible. I was reading this yesterday. They cant be run well, so what choice do they have but to close shop!

Originally Posted by avishar

They posted a loss of Rs 50,992 crore!, the highest ever seen in corporate India. I wonder if they can survive?

[fordday]

Airtel posted 23000 Cr losses yesterday. The figures are all because of provisions set aside for the supreme court mandated payout to the GoI.
Jio has only 13 cr to pay.

Airtel and Vodafone went to GoI asking for some relief. But Jio shot off a letter to GoI asking them not provide any relief to these two entities. They in fact proposed that Airtel and Vodafone sell off their assets to pay off the debt.

Originally Posted by 2000rpm

I am sad at the kind of treatment government is giving to Telcos. In a duo poly, Jio and Airtel will milk customers. I seriously doubt the ethics of Jio and their business strategy.

I am scared of the day when only Jio remains in the field.

[sgiitk]

Both our phones formerly RCom and BSNL are on Voda. So I have a personal interest here. I am sure the No 2 will not be allowed to sink

[deehunk]

My first job after engineering was as a Site Engineer for communication tower installations. It was a contract job working for Tata Teleservices, Reliance was still a small player, Hutch and Airtel were most popular those times. I first learnt about Idea when working in Indore. Things have come a long way, it is some what unfair to me that Jio has established a monopoly in the market. If everything wants to be owned by Reliance, who is going to invest in this country. The GOI should step in and save the investors.

[Durango Dude]

Airtel is also in the same boat due to AGR issues. I think basically Jio has gatecrashed into the party and also the revenue per user is dropping vs rising input and spectrum costs. I've Vodafone and have no confidence to port to Jio so have a separate Jio number.


https://www.thehindu.com/business/In...le29973197.ece

[ruzbehxyz]

Having both Vodafone and Airtel in the family, I'm worried about the future of these companies. We don't want Jio monopoly.
If any of the existing companies stop, what happens to our existing numbers which are crucial and registered at different places like banks etc.?

[2000rpm]

Originally Posted by fordday

Airtel and Vodafone went to GoI asking for some relief. But Jio shot off a letter to GoI asking them not provide any relief to these two entities. They in fact proposed that Airtel and Vodafone sell off their assets to pay off the debt.

I am scared of the day when only Jio remains in the field.

The government was quick to reprimand Amazon and Flipkart for predatory pricing. No one in the government dares to ask any questions to JIO, when their go-to-market was a clear case of "I will buy my win".

Soon, retail segment will see such exploitation when Reliance will enter this space!

[avishar]

The markets seem to be reacting in a different day since the stocks of both Airtel and Vodafone are soaring today. Ofcourse, Vodafone-Idea is growing from a penny-stock level, their shares are trading at Rs 3 after being hammered to that level over last year.

The logic is, if Vodafone goes down, Jio and Airtel will be big beneficiaries, with each gaining atleast another 100 million subscribers overnight. Considering that Airtel is a bit diversified since they also run successful telecom networks in Africa combined with their good results this quarter (If you keep aside the one-off payment), sets these two up very well in a future duopoly world.

Let us also not forget that the government is spending money in BSNL to get them upto speed and make them offer 4G services to customers. Infact, BSNL could also benefit from a failed Vodafone-Idea.

On the other hand, government might just step in and save all of them, because if Vodafone goes belly-up the NPAs that will be added to the banking system will plunge them into a new crisis, when they were just looking to have put the NPA problems behind. Also, a shock-exit by Vodafone does not bode well for future investors. Therefore, Vodafone stock is so cheap now, it does not hurt buying more.

However, the bigger question is, what is the government's role in ensuring health and fair-play in sectors? Is the government to be blamed for inefficient private sector firms, is one side of the debate. On the other side is, is the government to be blamed for predatory pricing and low enforcement of competition clauses. If the government today tells telecom companies that there has to be a base floor in mobile data prices, will that be looked upon as interventionist?

[srini1785]

A Related article to this news.

https://www.ndtv.com/business/either...-media-2131192

I remember that when vodafone was hutch (anyone remembers the pug?), it was a NRI CEO (don't remember the name ) who led the acquisition in spite of warning over the regulatory policies.

What will happen now is something like this, a few rating agencies like fitch , moody etc would downgrade india prospects. Media would create a big issue, it would be a 24x7 big TV show and our great GOI would then appease telecom companies with some freebies like a favorable 5G roll out and everyone is happy.

Oh btw this thread would go to dust .