Vodafone Idea’s Ability To Compete In India’s Telecom Market May Weaken: Moody’s

Lack of relief from the Supreme Court of India on payment of telecom dues is likely to weaken Vodafone Idea Ltd.’s ability to compete in a market that's on course to become a duopoly, Moody’s Investor Services said in a note on Friday.

On Thursday, the apex court dismissed petitions of telecom operators seeking a review of the definition of ‘adjusted gross revenue’ that makes them liable to pay thousands of crores in pending dues. Regulatory data released on the same day showed further erosion in the subscriber base of Vodafone Idea and Bharti Airtel Ltd.

The operator’s financial burden will weaken its ability to compete against Reliance Jio and Bharti Airtel, which will likely gain a higher local market share, Annalisa Di Chiara, analyst at the rating agency, said in a note. While a fresh blow, the judgment is no real surprise and Bharti Airtel had already made provisions to help offset the impact on its balance sheet, she said.

Still, according to Chiara, the wireless carriers’s debt and leverage are set to rise as the impact of the ruling “on its credit profile will likely be significant”.

Meanwhile, Bharti Airtel and Vodafone Idea are evaluating filing a curative petition before the Supreme Court for relaxation on penalties and payment deadline.

On Friday, Vodafone Idea shares fell 25.83 percent to Rs 4.45 apiece on the NSE while the benchmark Nifty 50 shed 0.03 percent to end the day at 12,352.35 points.