Government may be the biggest loser in case Vodafone Idea collapses

With outstanding dues of nearly Rs 1.6 lakh crore in spectrum payments and AGR dues, the government may be the biggest loser in case Vodafone Idea collapses under crippling losses and heavy debt.

The hit for the government just doesn’t stop here. If one adds the outstanding Rs 23,000 crore owed to the banks, the impact could be one of the biggest in corporate history as a large part of the loans (65-70%) is extended by state-run lenders. The banks have further extended guarantees worth thousands of crores to the company, which also run the risk of defaults.

“The telecom department and the national exchequer would lose the most in case of a collapse of Vodafone Idea. The picture looks grim considering the poor recoveries and unrealised outstanding after the collapse of Anil Ambani’s Reliance Communications and Aircel, where too several thousands of crores of rupees remain locked. Taxpayers stand to lose the most,” an analyst with a leading brokerage told news agency.

Cumulatively, the company currently has a debt of Rs 1.8 lakh crore, and has been bleeding financially with losses pegged at Rs 7,000 crore during the March quarter. The debt tops Rs 1.8 lakh crore, according to ICICI Securities. “We see payment of liabilities coming soon, while fund availability remains a challenge,” it said.

According to numbers sourced from various analysts and Vodafone Idea’s financial results, at Rs 107, the company remains precariously placed with the lowest average revenue per user (Arpu) among its peers.

Reliance Jio reported Arpu of Rs 138 and Bharti Airtel at Rs 145, though the latter has said time and again that at least Rs 200 Arpu is needed to nurse the capital-intensive sector back to health.

Vodafone Idea’s poor outlook was evident after the SoS calls given by its promoters, who have refused to make any further investments into the company, and are asking the government to support its survival.

Goldman Sachs said that it expects capex for Vodafone Idea to remain under pressure, “resulting in continued market share loss”.

It said that between December this year and April of 2022, the company has about Rs 22,500 crore of dues (debt, AGR and spectrum) payable.