Facing financial challenges, Vodafone Idea (Vi) confronts a new obstacle as Tata Communications Transformation Services (TCTS) allegedly terminates a service contract due to unpaid dues. Vodafone Idea ensures that customer services will continue without disruption, despite the conclusion of the contract with a Tata Communications unit, as the responsibilities will be transitioned in-house.
Vi’s Response and Planned Transition
In a statement to ET, a Vodafone spokesperson said, “In view of TCTS’s decision to exit some managed services, both parties have agreed to a planned transition. VIL will now insource these services like the other telcos already have.” The spokesperson added, “This was also the model followed by the company prior to these services being outsourced to TCTS. This will not impact VIL’s services to its customers.” While Vi maintains customer services won’t be affected by insourcing the work, analysts see this as a worrying sign for the company already struggling to raise funds.
Concerns Raised by Analysts
“For the first time, a big vendor has publicly announced termination of services to Vi, which does not bode well for the company going forward,” says Rohan Dhamija, head (India & Middle East) at Analysys Mason.
Unpaid Dues and Vi’s Financial Issues
Vodafone Idea failed to clear Rs 221.19 crore worth of dues to TCTS, who handled crucial maintenance work for Vodafone Idea’s fiber assets. While Vi is said to be clearing its debt obligations to lenders and banks in a timely manner, the dues towards vendors are being delayed.
Worries from Key Infrastructure Provider and Airtel CEO
Key infrastructure provider Indus Towers also expresses concern over mounting Vi debt. Airtel CEO Gopal Vittal even voiced worries about stalled progress in debt recovery. Besides Indus, Vi needs to pay other vendors such as American Tower Corp (ATC), Nokia, and Ericsson.
Struggling with Cash Flow and Debts
The joint venture between UK’s Vodafone Group Plc and India’s Aditya Birla Group (ABG) has been battling cash flow issues, hindering capital expenditure and vendor payments. Hence, the company has been unable to seal 5G network equipment supply deals with vendors. Vi had ended the second quarter with Rs 2.12 lakh crore net debt and a cash balance of Rs 119.6 crore. Its dues to banks and financial institutions stood at Rs 7,860 crore at the end of September. As per the company’s books, existing debt payable by September 30, 2024, is Rs 7,174 crore.
