Millions of 2G subscribers to face challenges if Vodafone Idea folds up

2G subscribers Vodafone Idea
2G feature phone. Image by hfng | Bigstockphoto

Around 134 million 2G subscribers of Vodafone Idea will be the most affected if the telecom operator folds up due to high debt and cash crunch for daily operations.

Market experts said it would be extremely difficult for these users, who mainly use feature phones and are daily wagers, to shift to 4G-only Reliance Jio and Bharti Airtel, who are now focusing on premium users.

In the case of Jio, these customers would either need to buy a smartphone or a 4G feature phone to access the Mukesh Ambani-led network. On the other hand, Airtel has already said that it will gradually increase tariffs for all customers, which would make the service costlier for Vodafone Idea’s low-end 2G users.

Last week Vodafone Idea, in its review petition to the Supreme Court, reiterated that if it goes bankrupt, then its subscribers will be left “high and dry.” The telecom operator had 255.40 million subscribers in the country, of which 121.4 million were mobile broadband (3G and 4G) subscribers in June 2021.

Analysts said that state-run Bharat Sanchar Nigam Ltd (BSNL) is also an option for Vodafone Idea’s 2G users, but the former’s current financial and operational situation is equally bad, which would make the transition through the portability process extremely tough.

“Airtel will increase prices if VI closes down so that only those who can afford the service come to its network. A lot of 2G customers, typically daily wagers, use low-quality phones, which impacts the network quality. Airtel might not want that,” an industry executive was quoted as saying by the Economic Times.

Ashwinder Sethi, Principal at Analysys Mason, told the publication that Jio and Airtel would be required to facilitate low end 4G handsets or 4G feature phones and provide handset subsidies to enable these users to afford a 4G handset.

“The question of what happens to the low end 2G handset users of Vi, in case it ceases to exist, has parallels to how operators globally have handled the 2G/3G switch-off issue, even though a portion of their current users were 2G/3G handsets users,” Sethi was quoted as saying.

Interestingly, Reliance Jio will launch its ultra-affordable smartphone, developed in partnership with Google, next month. It aims to migrate its existing 4G feature phone users to JioPhone Next and target 2G users from rival telcos like Airtel, Vodafone Idea and BSNL.

Jio, however, hasn’t revealed the price of its affordable 4G smartphone. Experts suggest that the JioPhone Next will be heavily subsidised.

Not just this, market experts believe Jio and Airtel would face network-related challenges if Vodafone Idea decides to stop operations and go into bankruptcy. Both telecom operators have already postponed their big-ticket network deployment deals without “trusted source” approvals from the Indian government.

The report, however, cited top executives of top mobile number portability companies and reported that they are fully prepared to process a heavy influx of requests from Vodafone Idea customers if it ceases to exist.

Syniverse Technologies India and MNP Interconnection Telecom Solutions India provide MNP services in India. The report said that these companies are confident of ramping up capacity to process requests and are already in touch with Jio and Airtel.

Vodafone Idea’s June quarter losses widened sequentially to Rs 7,312.9 crore ($988.4 million) on a 4.7% fall in revenue of Rs 9,152.3 crore ($1.24 billion), which was the lowest in more than two years.

The company’s subscriber base declined by 12.3 million to stand at 255.4 million subscribers as against rivals Jio and Airtel, who have 440.6 million and 321.23 million, respectively.

Goldman Sachs estimates that the telco could face a $3.2 billion cash shortfall until April ’22 at its current EBITDA run-rate. It has stiff upcoming payment commitments towards existing debt repayments, spectrum payment instalment annual AGR payments.

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