Let us talk about Vodafone Idea Limited (VIL) .
The giant telco came into existence after the merger of Idea and Vodafone – both giants for all facts and purposes.
However, the merger was more of a necessity than a meeting of minds. Facing stiff competition from the big players and a market disruption caused by Jio, both Vodafone and Idea had only two options – come together or perish. The fact that the majority of the mid and small players were already driven out of the market was not particularly encouraging.
Even after the smooth merger, the woes of this telco have not reduced. If anything, it has only increased and has reached such proportions that all projections predict the company to file for bankruptcy in the foreseeable future.
The main culprit is the much-debated AGR dues issue which has been plaguing the company and its predecessors. The Supreme Court is adamant on its stance regarding the collection of the dues and government is very vague in its approach towards the resolution of the issue and has no set deadlines.
All this is gradually hurting the chances of this telecom behemoth. Markets have become apprehensive about its capability to repay and the risk of default looms large.
So, what is at stake?
A struggling company with a 15,000+ strong workforce (direct) and much more indirect.
Banks – private and public – with additional bad debts and NPA in their books.
Dwindling investor confidence and subsequent exit from the Indian Markets.
A nation already derided the world over for tax terrorism – with a new case study and lower goodwill.
And finally, a government, which still won’t be able to recover its dues.
One would ask why is the Government so adamant and keen to recover its AGR dues. Turns out, it is not. Yet, the lack of proper policy is hurting us more than we actually know. Either the government is really inefficient in the way it works or it probably doesn’t care about the welfare and just wants to collect more revenues.
Whatever be the case, it is we, the common citizens of the country, who will eventually end up losing.
A duopoly market, thousands of job losses, funds flowing out and subsequent fall in the markets, rising NPAs in Banks which are already a bit fragile, tax terrorist nation tag, fall in ease of doing business rankings, and so much more.
It is high time that government seriously reconsiders its approach because of the cash cow that Vodafone Idea is (and all other companies in the telecom sector have been), its closure would hurt the government treasury more than it staying in business ever would.
P.S. The government has introduced the Taxation Laws (Amendment) Bill this evening, while I wrote this article. This bill is slated to primarily benefit VIL and hence, I’m hopefully putting a question mark in the title.
Stay tuned for latest updates!