Vodafone India - Why Govt. of India Intervened

1. 1
Updated: Mar 2023
Vodafone India- 2023
Why Govt of India Intervened

2. General
Telecom Industry
India - Three Pillar Model
Key Message - Global Telecom Services Market
• Market Size: $2.9 Tn, Growth (CAGR): (6%), Recovering since COVID
• Technology Change: High, Life Cycle: Matured, Regulation: Heavy
• Avg P/E < 13 (no growth), Industry is struggling in generating ROI
• Organic Growth: Both Horizontal and Vertical Play are employed
• Inorganic Growth: Adapt, Amalgamate, Acquire
• India’s telecom network is the 2nd largest in the world by the number of
subscribers. Vital services are fixed line and mobile telephony, internet, media, and
TV broadcast.
• India is following the three-pillar model because of price elasticity and rapid
technology change, making it arduous for providers to get sustainable ROI.
• The financial health of the industry is in distress driven by debt. The key dragging
force is fees for spectrum and AGR (licensing).
Airtel
Vod Idea
JIO
??

3. General
Key Message
• Market Cap
o Airtel: Rs 4.55 Tn
o Voda Idea: Rs 236.76 Bn
o Jio: Not listed, but profitable
• Recently the Government of India had to intervene in the struggling
Vodafone Idea (VI) by converting the interest owned on its spectrum and
AGR dues to equity, making the government the largest shareholder. It will
enable the company to raise more debt and fund it for growth.
• The move by the government will only reduce 7% of the company’s Rs 2.2
Tn outstanding debt (as of September 2022), which would result in extra cash
for the future by reducing its IBL.
• The government had to intervene because it can't allow the telecom sector to
be controlled by a duopoly of Airtel and Jio. While this is a welcome move, it
needs to reform the sector (like scrapping AGR ) so that telecom operators
can sustain their business on market principles with less intervention.
Telecom Industry
VI – Why Govt. Intervention