Opinion: Vodafone Idea should not become a noose around the government’s neck! Govt should keep an exit plan ready for vodafone idea
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Presently there are three private sector companies in the telecom sector. These include Mukesh Ambani’s Reliance Jio, Sunil Mittal’s Bharti Airtel and Vodafone Idea. Jio and Airtel have started their 5G services while Vodafone Idea is yet to do so. The number of its customers is continuously falling. Jio had entered in 2016 and today it is the largest telecom company in the country. Airtel has somehow managed to survive the battle, but Vodafone Idea is in dire straits. Britain’s Vodafone Group and Aditya Birla Group have stake in this company.
2.2 lakh crore debt
At the end of the September quarter, the company had a debt of Rs 2.2 lakh crore while it had a gross cash balance of just Rs 190 crore. The government had announced a scheme to give relief to the telecom companies. The government wants that more than two telecom companies should remain in the country and through healthy competition, customers should get better service. This is the reason why the government had decided to take a stake in Vodafone Idea for the short term. The government has done this to support the company in the short term. But sooner or later the government will have to find a way to sell its stake in the company.
There are many examples around the world when governments have bought stakes in companies to save them from ruin. Many of these companies were able to get their business back on track due to government intervention. The British government invested £45 billion in NatWest Group to rescue the country’s banking sector and later bought an 84 per cent stake in it. Now there is a preparation to hand it over to private hands once again in 2025-26. For this, shares are being sold in a phased manner.
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Exit plan will have to be prepared
Similarly, in 2008, the UK government nationalized Northern Rock, the country’s fifth largest mortgage lender. This was a period when the global money markets were in difficult times. This bank was divided into two parts. Last year it was completely handed over to private hands. In the US, the government bought a 60 per cent stake in auto company General Motors by giving a package of $30 billion. It had government officials on its board but the government did not interfere in its functioning. By 2013, most of its shares were sold to the public.
In the case of Vodafone Idea, the government has made it clear that it has no intention of running the telecom business. Government support will provide the company with the necessary liquidity and support to raise funds. But the government cannot remain in the company for long. It has its own dangers. It is possible that the coming governments or political leadership will treat it like a public sector company. If this happens, the taxpayers will have to bear the loss. So the government will have to chalk out an exit strategy and sell its stake as soon as the company gets back on track.
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