Vi Service Disruption Fears Amidst Vendor Spat, Company Assures No Impact

20 Jan 2024 , 10:21 AM

Vodafone Idea (Vi) has stated that even though a division of Tata Communications is ending a service contract, the work will now be outsourced, so users won’t experience any disruptions in service.

Analysts, however, expressed concern about the company’s prospects after learning that Tata Communications Transformation Services (TCTS) had terminated Vi’s services for non-payment of dues. This was the first vendor action taken against the cash-strapped carrier.

When Vi failed to pay dues totaling Rs 221.19 crore on time, TCTS decided to cancel Vi’s services. Nonetheless, the troubled telecom claimed that since the work will now be outsourced, it won’t affect the services provided to its clients.

Following TCTS’s decision to discontinue some managed services, a planned transition has been agreed upon by all parties. Like the other carriers, VIL will now outsource these services, a Vi representative informed ET.

‘The corporation also operated under this paradigm before TCTS was hired to provide these services. The representative went on, ‘This won’t affect VIL’s services to its consumers.

Vi’s stock finished the day down 0.20% to settle at Rs 15.08 on the BSE, while Tata Communications’ stock down 2.08% to close at Rs 1738.10 apiece. The company announced its December quarter results on January 18. TCTS was mostly in charge of operating and maintaining Vi’s fibre assets, among other things.

Vi has been paying off its debts to banks and lenders on time, but it is taking longer to pay its vendors. Vi’s main supplier of network infrastructure, Indus Towers, is also growing more and more alarmed about the company’s escalating debt. Although both businesses are having talks to recoup the past owing amounts, nothing substantial has been accomplished thus far.

Gopal Vittal, the CEO and MD of Bharti Airtel, recently said, ‘We believe there has not been much headway in this area, which is a matter of serious concern for all shareholders, including Airtel.’

Despite having conversations with a number of investors, including those in the US, Vi has not been able to finalize the money to date. Akshaya Moondra, the CEO of Vi, had previously stated that talks with possible investors would end in the December quarter, and bank loan funding would come next. However, nothing has been decided upon yet.

The joint venture between Aditya Birla Group (ABG) of India and Vodafone Group Plc of the UK has been struggling with cash flow, which has hampered capital expenditure and vendor payments. As a result, the business has not been able to finalize agreements with suppliers for the provision of 5G network equipment. Due to their quick expansion of 5G service, rivals Reliance Jio Infocomm and Bharti Airtel have been gaining consumers at the expense of Vi.

Vi had a cash position of Rs 119.6 crore at the end of the second quarter and net debt of Rs 2.12 lakh crore. At the end of September, its debt to banks and other financial institutions was Rs 7,860 crore. The current debt, which is due by September 30, 2024, is shown in the company’s accounts at Rs 7,174 crore.

In addition to Indus, Vi also has other suppliers to pay, including Ericsson, Nokia, and American Tower Corp (ATC).

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