Ever since Mukesh Ambani’s Reliance started pilot runs of their massively anticipated — worth $22Bn — Jio network, there has been a sense of excitement, as to how this could possibly revolutionise the Indian telecom sector, which is in dire needs of such a revolution.
Days after the official launch, there’s both good and bad coming out of Jio. The goods include faster network connectivity as promised and frenzy among competitors who are now looking to come up with cheaper, short-range data plans along with upgraded services to retain customers. All of this, is helping customers reap out maximum benefits.
The bads however, include extreme unavailability of Jio SIM cards with people flocking up to stores in queues since morning, waiting to get their hands on one. Another downside, which has come up in recent reports in the slowing speed of the supposed-to-be-lightening-fast network. The former is now being taken care of, while the latter could be due to bandwidth issues. Again, Jio is in the process of taking up additional interconnection points from rival operators and the speed issue too should be sorted out soon.
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And while the negatives on Jio aren’t doing much damage to the brand, its positives have shaken up competitors in India, who are now looking to infuse more money to retain customers and provide better connectivity. The most recent of those shake-ups is within Vodafone India.
According to a report published in The Economic Times, Vodafone’s UK parent is now looking to invest as much as $3Bn into its Indian counterpart, even as it thinks over the IPO plans, yet again. The measure is being taken to reduce Vodafone India’s rising debt (which stood at about ₹81,500 crore in 2015-16), and to also prep it up for the upcoming spectrum auctions. These auctions will earn huge bucks for the Government, considering that the bids are set to go way up (they were huge last year as well) as Jio is now into fray.
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A person familiar with the current developments, told ET,
Overseas market conditions make it favourable to replace the debt here with equity as the return on equity is higher here and it will cut the debt servicing costs.
There’s of course no comment from Vodafone on this. The company however did mention that it plans to invest more in India and that there’s no change in the IPO timetable.
And then, on the consumer front, there’s of course the all new price wars. Until Jio’s entry, operators were freely charging exorbitant data pack prices, making India one of the costliest markets in those terms. However, with Jio’s introduction of its internet plans, which cost the consumer a paltry ₹50 for every GB of 4G data they use, Vodafone and others have been force to slash prices and offer more affordable plans to users.
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As a result, despite the company bearing a brave face, there could be substantial delay in the proposed IPO. A person close to all these developments said,
The company is evaluating if it should further push back its IPO as the market conditions are bleak for the next few months.
In response, Vodafone gave the following statement to an email queried by the newspaper,
We continue to prepare for a potential IPO and there has been no change in our timetable.
Just to put things into perspective and give you a clearer view of why Vodafone India may be apprehensive of an IPO, Jio’s launch day resulted in Airtel and Idea loosing close to $2Bn combined, in a day in market capitalisation, as investors backed Reliance heavily.
