What If Vodafone Idea Goes Bankrupt?

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The current situation of Vodafone Idea, India’s third largest telecom company, is bothering the company, its subscribers and to an extent, the government. The stepping down of Mr. Kumar Mangalam Birla as the non-executive chairman of the company is the final chapter in the Birla group’s painful tryst with telecom.

Vodafone merged its operations with Idea in a $23 billion deal in 2017. However, the entry of Jio in the same year made their life tough in the three-player market.

With the debt of Rs. 1.86 lakh crore, Vodafone Idea is now on the edge of bankruptcy with the owners. Birla’s stake in the company is 27% and Vodafone’s stake is 44%, they are unwilling to bring in more money. With a loss of Rs. 44,233 crore in FY21, Vodafone Idea now has a negative net worth of Rs. 38,228 crore.

Mr. Kumar Mangalam Birla has stated in his letter that he is willing and ready to hand over his entire stake to the government to keep the company as a going concern with its 27 crore users. However on the other hand, the UK-based Vodafone Plc has made it clear that it is no longer going to pool in equity into the company.

What will happen to the existing subscribers if Vodafone Idea shuts down its operations?

Vodafone Idea users are worried about what is going to happen to their mobile connections if the company actually shuts its operations in India. Well, there is nothing to be worried about as the subscribers will be given enough time to port to other telecom service providers.

The rules require that the telecom companies, before shutting down their services in India, must give at least 30 days advance notice to subscribers and notify the Telecom Regulatory Authority of India (TRAI) 60 calendar days in advance.

For example, when Aircel, one of the telecom companies announced the closure of its services in 2018, its subscribers were forced to choose a different service provider. They were allotted Unique Porting Code (UPC) by TRAI through which they were able to choose for Mobile Number Portability (MNP). Till October 2019, the subscribers could port out to some other network. After the deadline, the subscribers who hadn’t ported yet, had to surrender their number as the UPC became invalid.

It seems that the era of low tariffs is going to be over now, with the telecom becoming a duopoly market with the two lords of the ring: Sunil Mittal and Mukesh Ambani.

Sources

  1. https://www.capitalmind.in/2021/08/what-happens-if-vodafone-idea-goes-bankrupt/
  2. https://www.fortuneindia.com/enterprise/can-vodafone-idea-die-to-live/105696
  3. https://www.quora.com/If-Vodafone-Idea-files-for-bankruptcy-what-will-happen-to-its-subscribers

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