Causes Behind The Huge Loss Of Vodafone India
India is considered to be one of the biggest telecom markets and Vodafone is one of the most prominent telecom corporate running in the country then how come it faced such a huge loss all of a sudden? Well, the first reason may be that Vodafone had been providing its customers quality services with minimum voice call chargers which were balanced out by raised mobile data charges. However, three years ago when Reliance Jio showed up the company dropped its data charges to the lowest limit in order to compete. That indeed resulted in India being the country with the cheapest mobile data in the world. But with a cost much greater than the temporary fame! While competing with Reliance they totally messed up their profit and loss calculations which resulted in them earning loss as a daily routine. The company’s failing condition coupled with its clash with the government policies which proved to be the most eminent reason for its huge loss. Since 2005, there has been a debate over the definition of adjusted gross revenue. In simpler words, telecom corporates are to pay somewhat a tax from their generated revenue to the department of telecom of the government. The companies only wanted revenue from telecoms to be calculated in this figure, but the government wanted a much wider definition, including non-telecoms revenue like sale of assets and interest earned on deposits. However, the final order came out to be in favour of the government of India and this placed a charge of INR 900bn on telecom companies. Whereas, Vodafone India’s total shares are worth INR 360bn! Woah! that came as one big blow!
Is Vodafone India Soon To Shutdown?
A sure short thing is that Vodafone India is completely bankrupted and the owners have no intentions of putting in more money into the already sunken ship. The CEO Nick Read did warn the government of India about the company’s condition and informed them of Vodafone quitting India if the situation prevails. However, later he took his words back with an apology due to some unknown reasons and said that Vodafone has no intentions of leaving India. But the truth is neither Vodafone nor the business partner Aditya Birla Group seems to put any more investment to save the company.
How Will Vodafone India’s Shutting Down Will Affect India?
When a corporate as huge as Vodafone gets forced to shut and leave the country, that sure won’t be a sign of a good place to invest for any further corporates. Vodafone is said to have tax issues with the government of India since the past 10 years and now if it leaves in such spoiled relations with the state it won’t let anyone forget it. This will earn India a badge of ‘INDIA THE POOR INVESTMENT ZONE’ and corporates will think twice before investing in India and that will be a great blow to the Indian reputation internationally and its economy.
How Is Vodafone’s Loss Going To Affect The Consumers?
This is quite simple, a corporate needs money so it extracts money from its consumers which mean that whether or not Vodafone stays in India it will surely pay its debts through its consumers in India and that can only be done by raising the cost of the services provided. So will all the other telecom companies will do and that may be considered to be a step towards a healthy economical telecom market. However, if Vodafone chooses to leave India it will leave behind only two competitors to play a duopoly in the country which is never a good option.
