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Vodafone May Exit India, Report Alleges, Shares of Vodafone Idea and Airtel Rise on Bailout News

Professor of Financial Economics and Part-time Value Investor, Transfin.
Oct 30, 2019 10:56 AM 2 min read

Vodafone may exit from India, reports allege. Shares of Vodafone Idea and Airtel rise on news of panel on bailout package. Who is to blame for the mess in the telecom sector?


Incoming: Rumours in telecom circles allege that Vodafone could "pack up and leave any day now" as losses and debt mount and subscribers leave in droves. Confirmation and more details regarding this are yet to be revealed. Business Insider


Meanwhile: Shares of Vodafone Idea zoomed by 8.57% and those of Bharti Airtel by 3%. The positive trends followed reports that the government had constituted a panel to work out a bailout package for the telecom sector. Firstpost


Let’s Play the Blame Game: It’s no secret that the telecom sector in India is in an unenviable position right now. Average revenue per user (ARPU) has been falling consistently. Data rates have plummetted – especially since Reliance Jio disrupted the industry with its dirt-cheap offers and sparked a price war. Then there’s the mounting debt which runs into billions of dollars.


When even one of these factors hits a company, it’s terrible news. When all of them strike together, it’s a disaster. And now, to top everything else, the Supreme Court’s recent verdict on AGR has imposed more due payments – a total of $13bn – on telcos.


Who is to blame for the telecom mess? This is a polarising question. An argument can be made that telcos are responsible for the mess they’re in, that by offering untenable rates they lampooned unsustainable debt onto themselves. But the opposing argument points to the steep spectrum prices the sector had to pay to the government, the adverse regulation, and the SC verdict which had been appealed by the state all the way to the centre. BS



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