Will Vodafone-Idea survive the AGR tempest?

Telecom major Vi faces its greatest battle yet as it negotiates AGR dues with the Centre, a decision that could seal its fate in India's telecom industry

- VERNIKA AWAL

Beleaguered telecom operator Vodafone Idea Limited, or Vi, is currently in talks with the Ministry of Communications over the much contentious Adjusted Gross Revenues (AGR) issue. While most details on the direction of these talks remain under wraps, the resulting resolution, whichever way it swings, will be decisive for the telecom operator’s survival in India.

The issue at hand is massive. On one hand, having a third private telecom operator in India—one of the world’s largest and fastest-growing consumer markets—is key. Without it, the market is left open to what is essentially a duopoly between Bharti Airtel and Reliance Jio—a factor that could be detrimental to the consumer interest of pricing pressures on the service providers in question.

On the other hand, a decisive call on AGR levies will be essential for Vodafone-Idea. The latter is the worst-performing lot of the three private operators, with a net debt of nearly USD 24 billion to the central government. This includes AGR dues of USD 8.4 billion—with the rest being deferred spectrum payments to be made by the cash-strapped telco.

WHY THE AGR DUES ARE FATAL?

The massive scale of dues has affected Vi significantly. According to data from the Telecom Regulatory Authority of India (TRAI)’s monthly subscriber tracker, in September 2018, the merger of Vodafone and Idea Cellular created India’s largest telecom operator in terms of user base by market share—at 36.6%, against Airtel’s 29.2% and Jio’s 22.5% market shares at the time, six years ago.

Vi, thus, had 428 million users in its network six years ago.

According to the latest TRAI data from July this year, the telecom operator holds an 18.5% market share across India and currently serves 216 million users. This also means that, in six years, Vi has lost nearly half of its user base.