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telecom | IST

See room for the industry to support Vodafone Idea's survival; duopoly not desirable, says telecom expert Sanjay Kapoor

There is a room for the industry to support the survival of Vodafone-Idea because if not, then the entire cost of passive infrastructure would fall onto Bharti, since they share a lot of passive infra, said Sanjay Kapoor, entrepreneur and consultant for telecom.

Kumar Mangalam Birla had said they would shut Vodafone Idea if they did not get relief from the government. Speaking to CNBC-TV18 at the Hindustan Times Leadership Summit in New Delhi, he said it was important for the government to find a solution for the telecom sector.
“Mr Birla doesn't generally make such statements. He is a very respected business person of the country and for him to have come on screen and make this statement is a serious stuff,” said Sanjay Kapoor, entrepreneur and consultant for telecom.
“The reality is that the company doesn’t owe to the banks alone but the government is probably the biggest lender or the company owes the maximum to the government of India on account of delayed spectrum or deferred spectrum and also on account of the penalties that have come in," said Kapoor in an interview with CNBC-TV18. However, a lot of equipment that is supplied to the companies today comes on credit to these guys and therefore there is a huge amount of ecosystem that gets disrupted like the distribution, content, services ecosystem etc. This is really a big caution statement that has been made,” Kapoor added.
“So, this is not good news for India and definitely not for the company that is in so much of distress,” Kapoor noted.
According to Srikanth Vadlamani, vice president-financial institutions group for Moody's Investors Service  from a bank’s perspective this exposure is quite meaningful. It works to around close to 1.5 percent of banking system loans. "The exposure would be concentrated, I don’t think it will spread across all the banks because most of it is in the form of off-balancesheet exposure, it is in the form of guarantees that the banks have extended. So this is going to move the needle as far as non-performing loans (NPLs) are concerned but clearly it depends upon which banks have those specific exposures and for them, the impact will be quite meaningful,” Vadlamani said.
When asked how much worried one should be that they would actually turn into an NPA, Vadlamani said, “In this case, both the stakeholders that is Vodafone and Idea have made it quite clear. If Vodafone-Idea has to default, there is a very high probability that that specific exposure will become an non-performing loans (NPLs) in the bank books. However, one must note that thhis does not become a group exposure - an Aditya Birla Group exposure and hence the groups overall other exposures become NPLs but this specific exposure will become NPL, he added.
"The crux of the problem is that it doesn't seem like the promoters of the company are willing to support this company if it comes to that," stated Vadlamani, adding that from banking sector perspective it would be negative.
Speaking about the price hikes, Kapoor further mentioned, “Definitely the price hike that has been announced last week is not good enough to take care of the woes of the industry. They will need a lot bigger price.'
"We have to go global on this and see why is it that rest of the world for similar services and much lesser data that they give to their customers charge USD 10-15, the cost in India is not any different. It is almost the same. They need to get their business model right but also there is a room for the industry to support the survival of Vodafone-Idea because if not, then the entire cost of passive infrastructure would fall onto Bharti, since they share a lot of passive infra.”
Moreover, "Duopoly is not what we want, nobody in the globe has settled for duopoly - it is not good for customers, country as well as the industry," said Kapoor.