Vodafone Idea Will Fire Thousands Of Employees As Consolidation Of Circles Start; Will Vodafone Survive?

Vodafone Idea has started operationally merging 6-7 of its weaker telecom circles with stronger ones, as the loss-making telecom carrier moves to cut costs and focus on prominent markets according to reports. 

How Would This Affect?

Basically, this decision will result in another round of job losses, they said, without specifying how many employees would be asked to leave. 

Further, the telco employs about 11,000 people directly, is working on severance packages for the workers, as per the report.

The operator emerged from the merger between Idea Cellular and Vodafone India, may even consider giving up the spectrum in its weaker circles (by revenue market share) going forward. 

What Does The Expert Say?

According to the latest quarterly report, Vodafone Idea, which at the time of its merger had a market capitalization of Rs 43,000 crore, has completed integrating 17 of its 22 circles. 

a senior executive at the telco said “The mood is edgy in the organization and the sense of uncertainty has upset morale,”. 

So far, Vodafone Idea kept quiet on the subject. 

Why Would this Happen?

These changes come amidst the company’s survival hinges on an upcoming verdict by the Supreme Court on the issue of adjusted gross revenue (AGR) and any relief the government may provide from statutory dues.

Later this week, the Union Cabinet is expected to announce relief measures for the telecom sector.

This basically includes staggering interest and penalties of the AGR dues over several years and reducing some non-AGR dues such as license fees and spectrum usage charges.

Further, the Cabinet move is expected before March 17 when the apex court will hear a modification plea filed by telecom operators, including Vodafone Idea, on relaxation in their AGR payment schedule.

Moreover, the operator is expected to pay a Rs 3,500 crore to the Department of Telecommunications (DoT) in a day or two. 

While the company has already paid Rs 3,500 crore to the department. 

But according to the troubled telco’s own assessment, its AGR dues amount to Rs 21,533 crore. 

Also, the principal amount has been pegged at Rs 6,854 crore. 

However, DoT has calculated the dues at more than Rs 53,000 crore.

Further, the company has sought 15 years’ time to pay up its AGR dues in full, after a three-year moratorium, as well as a GST refund of Rs 8,000 crore, which it said can be adjusted against the AGR liability. 

Also, they have asked for a reduction in license fees and spectrum usage charges to remain financially viable. 

The company’s gross cash balance was $1.8 billion as of December 19, with spectrum dues of $450 million payable this month, according to a report by Goldman Sachs.