The Vodafone-Idea crisis had been gaining roots which as now has surfaced, demanding attention from the government and other stakeholders. The rescue mantra of the government may provide some relief but it cannot provide full safeguard in the long run.
The damage done has been attributed by some experts as faulty strategic and myopic vision partly by the players themselves and because of the government policies. The government is now left with no choice other than to keep this sector alive for strategic reason and technological advancement. The crisis reveals strategic bankruptcy of the government.
Mr. Mahmood Khan, currently working as a social entrepreneur, is chairing a couple of leading organisations and is on board of two other organisations which are focusing on Education, Entrepreneurship, Sustainability, Women Empowerment, Innovation, Livelihood, Skills, and Capability building programmes. Mr. Khan was nominated as Person of the Year 2009 by Forbes India. On the root cause of the crisis, he said, “The root of Vodafone-Idea crisis is not new; it started 7 to 8 years ago. If we had treated it as a strategic sector, we would have not allowed it go through such highs and lows. It is very strategic for any country or economy and it requires transformative approach to develop this sector. But if you go back to what happened 7 years ago, we had a competitive scenario earlier but that competitive scenario over a period of time got tarnished and has been damaged partly of course because of the players themselves and partly because of the government policies.”
He added, “What happened is that one big player was allowed so much entry into it that it has literally destroyed the industry. If you look at the original investment, it was not by India but was done by America. Overall India has not been investor neither in technology nor in infrastructure. One player was allowed into and it had deep pocket and 25 billion was put into it. Everybody else got wiped out because there was no vision, investment or commitment. They all have been knocked out and suddenly they ran away with the market share of 30-40 per cent and that is the root cause of the entire crises.”
“This sector became sick and only three players were left. Out of these three, one has taken a monopolistic approach and he thinks he owns a government. The other two are laggards and they have no choice. It is a mess mostly created by bureaucracy and poor foresight and now they are trying to save it because if they don’t keep Vodafone-Idea alive then there would be a monopoly kind of situation here. It is a very sad story for country of 1.4 billion people where there is no competitive sector; there is no infrastructure which the people deserve. The government has no choice and it is too late for the government to save anybody; the government has been left with no choice other than to rescue them. The government literally by default has to save the Vodafone-Idea and they cannot allow it to die,” he said
MK Venu, founding editor of The Wire, in his article, “Why is Modi Govt Forcing Tax Payers to Invest in Loss-Making Vodafone-Idea?” has reasonably argued on the question of why the government is becoming the single largest shareholder in Vodafone-Idea which owes banks (tax payers) Rs 48,000 crore in loans and guarantees? Primarily, because Vodafone-Idea additionally owes the Centre over Rs 1,50,000 crore as dues on account of spectrum payments and accumulated gross revenue share. The Modi government has chosen to convert the interest dues of Rs 16,000 crore owed by Vodafone-Idea into equity of the company at Rs 10 per share.”
He added, “The Modi government is actually being coerced into acquiring a big stake in Vodafone-Idea because most analysts feel the company has no future as the telecom sector has moved to a duopoly control of Reliance Jio and Bharti Airtel. Analysts believe it is only a matter of time before Vodafone dies a natural death. With 200 million active mobile subscribers, the company is deemed too big to fail and that is perhaps the reason why the government has chosen to take a stake in it.”
“The most compelling argument made by the Narendra Modi government for privatising Air India was that it lost Rs 20 crore every day and this daily bleeding had to be stopped to unburden the tax payer. AI suffered a loss of over Rs 7,000 crore in 2020-21. Note how the government is following exactly the opposite logic while recently agreeing to take a 35% stake in telecom company, Vodafone-Idea, which lost over Rs 120 crore a day in 2020-21 and had shown annual losses of Rs 46,000 crore,” he argued.
Dr. Prem Chand, Sr. Assistant Professor, Department of Political Science, Atma Ram Sanatan Dharma College, University of Delhi, while sharing his perspective, said, “Four viable operators VI, Jio, Airtel and BSNL/MTNL are playing in this vital sector would be an ideal business model which would avoid monopoly and ensure fair competition. The co-promoters of VI have to put their own efforts to come out of the woods before banking on investors/ TRAI/DOT. We hope that other Telecom companies will emerge as strong and dynamic operators competing not only in tariffs but also in the quality of service, thus benefitting the customers who deserve nothing less than world class telecom service.”