Vodafone Idea (Vi) and Bharat Sanchar Nigam Limited (BSNL) are likely to struggle over the next few years to revive their business. But what happens after these few years? Will there be an absolute revival or will these companies continue to struggle? Well, no one can predict the absolute future, but one can take a calculated guess. How can Vodafone Idea and BSNL make a difference? The answer is simple: higher ARPU (average revenue per user), lower subscriber churn and funding from external investors (for Vi), as well as adding new subscribers to the mobile broadband segment and fixed.
For me, it’s easy to sit here and write that if the things mentioned above go well for Vi and BSNL, their business will turn around to success. But in reality, things are more complex and more difficult.
The rescue package only helped Vodafone Idea survive; business needs more to thrive
Just take the example of Vodafone Idea. Prior to September 2021, many were of the view that Vi would eventually shut down as the company was not making any profit and adding new subscribers. There were only losses and the company had failed to raise capital from outside sources.
At this point, the government stepped in and said, hey, telecom operators, here’s a relief program for you. The center solved one of Vi’s biggest concerns, like any other struggling company – the liquidity problem. With the relief program, telecom operators were given the option to defer Adjusted Gross Revenue (AGR) and Spectrum Usage Charges (SUC) fees for up to four years. As expected, Vi opted for the adjournment. Additionally, Vi has elected to convert its interest expense to equity for the government (which has not yet happened).
A year later since the announcement of the rescue program, Vi is still not doing very well. Its performance is still the same – loss of active customers, no funds for rapid growth, but one thing has changed. The fear of business closure has disappeared. The relief program ensured the company did not go bankrupt for the foreseeable future. It also reflected the government’s intention not to let India’s telecommunications sector become a duopoly.
This means that as long as there is no other private telecom player on the scene, no matter how badly Vi performs, he is most likely going to stay alive because the government won’t let him die (I could be wrong in the long run – run for saying that). A duopoly is not good for customers or for the industry.
But does that mean Vi would continue to struggle forever to make ends meet? This could very well be the case or things could really change for the better. Looking at current telecommunications conditions and what has happened over the last few years and where the industry is heading, it would really take a miracle for Vi to change things in the short term. But in the long run, if the company can get funds and show a positive performance, things can change forever for the good. The same goes for BSNL. No amount of relief packages can save the business until it starts operating. The fundamental fundamentals of the business must be strong for a positive future.