What Went Wrong With Vodafone Idea Limited?
Ads like ‘What an Idea Sirji’ and ‘Zoo-Zoo’ were quite the hit back in the day. Idea and Vodafone had a strong brand image, with a market share of 17.01% and 19.15% respectively in 2015. However, in this dynamic market environment, they were not on their toes to adapt and a few poor decisions resulted in their eventual downfall. By the end of 2021, their combined market was at 23%.
🥊 Jio’s Impact
September 15, 2016, was the day when Jio entered the telecom market. It had a strong vision backed by the Reliance group‘s financial resources. They played their cards right by offering 6 months of free data which did the trick and Indians got hooked. Within the first 3-4 months, it gained 6.4% of the market share and 33% in the next 3 years. The fact that Jio became the first player to bring Voice over Long-Term Evolution (VoLTE) technology gave it a competitive edge as it enabled better voice connectivity and 4G internet speeds across devices.
On the contrary, neither Idea nor Vodafone was quick enough to react in replicating the same and took their own sweet time to adapt. Which cost them their users as they shifted to Jio. This led Vodafone and Idea to lose a sizeable chunk of their market share.
🤝🏼 Birds of a Feather, Flock Together
The growing dominance of Jio led to their merger and they became Vodafone Idea Limited or VI. They hoped to get back their market share which they lost but the merger failed to do that. According to Fortune India, between the fiscal years, 2018-21, the merger incurred a loss of ₹1.33 lakh crores.
🪤 The Debt Trap
The Department of Telecom is responsible for collecting license fees and spectrum usage charges as a percentage of a company’s adjusted gross revenue payments. VI kept on delaying these payments and racked up quite the debt of ₹44,000 crores which also affected their credit score.
According to reports, by the end of 2021, the debt-ridden Vodafone Idea was liable to pay ₹2000 crores. The debt restricted them from further investing in their infrastructure and expansion which became a roadblock to their growth. In 2018, Vodafone Idea Ltd.’s stock was trading in the range of ₹50-70. By the end of the year, it went as low as ₹3.4 per share.
🤔 Where Are They Now?
The company has been making efforts to turn things around as Vodafone and Idea plan to infuse up to ₹3,375 crores and ₹1,125 crores respectively. They may also monetize their assets. While this might not be enough, this is a start for the debt-ridden company.