Corporate Grapevine  ^{123    15}   

Published: Aug 29, 2019
Updated: Aug 29, 2019

Vodafone’s bitter taste of India

It seems Mukesh Ambani’s gameplan to capture the Indian telecom market is heading for a grand success. Despite being a Johny come lately, Reliance Jio has streamrolled the segment to emerge as the undisputed leader in the telecom space. The latest TRAI report shows that Reliance Jio is No. 1 in India with 31.5 per cent revenue marketshare, pushing Airtel to the second place with 29.7 per cent and Vodafone Idea to the No. 3 position with a 27.8 per cent share.

But more interesting than this is a report that Vodafone has started mulling over whether to continue or exit from India.

With Vodafone Idea making continuous losses, there is no clarity in sight on whether the company will ever make money. Insiders say both promoters, the Birla group and Vodafone PLC, have lost interest in the company and are keen to offer their stake for sale.

The problem is that the merged entity is not showing any signs of a turnaround and Vodafone has already indicated that it does not mind even if it gets zero valuation. Analysts say the company will require another dose of equity infusion by April next year, but considering the 50 per cent fall in the VIL share price since May this year, it is debatable whether anyone would agree to invest more. The Rs. 25,000-crore investment made in the rights issue this year has lost half of its value and none of the shareholders is ready to put in more money.

Vodafone is facing heat from both sides. While externally, Reliance Jio has administered a body blow to it, internally, Vodafone-Idea is reportedly facing a serious problem of cultural differences and turf war between Vodafone and Idea. The management has not succeeded in integration of two different cultures – one MNC-style and the other Marwari. Observers feel the exit of the CEO Balesh Sharma is the result of this turf war within the merged entity. There is therefore some logic behind reports that Vodafone may throw in the towel and exit from India.