Vi faces a crucial challenge with shrinking user base and 5G launch

Following the government's approval for conversion of its AGR dues into equity shares, Vi must now reenter the client retention race with a variety of consumer offers

Vodafone Idea(Vi) is facing the crucial task of stopping its dwindling user base, gaining new customers and introducing 5G services in the market in order to achieve impermanent recovery whilst the heavily indebted telco is in talks with banks about refinancing its current loans and seeking new ones for capital spending according to industry insiders.

Due to the fact that Vi's competitors Bharti Airtel and Reliance Jio, are already providing 5G services in more than 200 cities and expanding rapidly, which Vi has not yet begun to provide, it is the sole telecom provider that hasn’t placed any orders for 5G service equipment and has had trouble paying its vendors’ bills.

Vi won't be able to provide a concrete schedule or strategy for 5G until its financial problems are resolved. The telco would only be able to place orders for 5G equipment with suppliers if it had proper funding, who wouldn't normally cooperate with the carrier on credit basis as vendors don't want to put themselves in further danger given how much debt Vi currently has.

A total of Rs 16133,18,48,990 will be converted into equity shares. The telco is required to issue 1613,31,84,899 equity shares with a face value of 10 rupees each at a 10 rupee issue price. With this conversion, the promoters’ ownership will drop to 50% from 74.99% and the government is anticipated to hold 33.14% of the cash-strapped telecom company that is struggling under a debt load of over Rs 2 lakh crore.

Following the government's approval for conversion of its AGR dues into equity shares, Vi must now reenter the client retention race with a variety of consumer offers . In an effort to do the same, the telco recently introduced a Rs 99 base plan in many non-metro circles that comes with metered pricing of Rs 99 in talk time, charged at 2.5 paise per second and 200 MB of 4G data with a validity for 28 days. This is comparable to the plan that was dropped by Bharti Airtel in more than 15 circles as its base plan replacing it with Rs 155 package as its base plan for prepaid customers.

The future revenue of the carrier will significantly differ from current revenues due to 5G technology in play. While a modest launch delay for 5G should not be a major problem, the absence of a defined plan is alarming.

Vodafone has constantly been recording a reduction in its consumer base for months now. After 5G network was introduced by operators in India in October, 2022, Telecom regulator TRAI's report stated that Vi lost around 3.5 million customers in the same month. Vi will undoubtedly lose users who wish to utilize 5G services in the immediate run. According to the most recent data released by telecom regulator TRAI, the telco has 24.3 crore mobile users, accounting for a 21.33% market share.

Things don't seem very promising for Vi right now. What awaits the telco post conversion of Rs 16,133 crore into equity shares will be interesting to observe.