The Analysis of the deal between Google and Vodafone-Idea

Google is in its primary communication to buy a stake of about 5% in cash-attached Vodafone Idea. At the very beginning, Vodafone and Idea were two respective telecom operator, in the year of 2017 both of these companies merged up and formed Vodafone Idea. Vodafone Idea is now in third-largest telecom operator in India.

The changing rate of demands after the merging between Vodafone and Idea.
The changing rate of demands after the merging between Vodafone and Idea. ( Source Google Picture)

Vodafone Idea shares approximately 2.7% higher at Rs.5.82 on the BST Thursday, providing a market price of Rs.16,724 crore. For a 5% stake, Google will have to shell out $110 million( Rs.836.2 crore) based on that. Its Nasdaq-listed parent Alphabet has a market cap of $968.05 billion.

The current value of Vodafone-Idea

In its current upload action to the Telecom Regulatory Authority of India (Trai), Vodafone Idea- retaliated with Rs.53,000 crore in AGR dues, of which it has so long only paid 7 per cent- tagged the stigma of the “deep financial distress” in the telecom fields in India, reflecting in unpredicted decline in taxes and revenues.

Over the past three years, half of a dozen operators have resigned by either merging their business with existing Telecom Service Providers(TSPs) or declaring bankruptcy, Vodafone Idea Ltd regretted.  According to VIL, the existing financial stress has been imposed in the sector only those which are not being addressed within a short term, leading to the cause of further bankruptcy and exit of TSP’s from the market let a state becoming superficial monopoly and removal of fair competition in the market. In this response, the Teleco’s comment is based upon the Trai’s declaration paper regarding the ‘Tariff Issues of Telecom Services’.

VIL stated that all among the telecom companies in the market, the government or public sector operator has been offered an important financial favour to sustain itself. In a commentary which precisely emphasises the profoundness of the crisis in the sector, VIL said there is a very consolidated likelihood of upcoming exits in the Indian telecom sector, and that is why it is conveniently for India to move towards a stance of superficial monopoly.

Clashes with other Telecom Services

However, Bharti Airtel has said the industry is dealing with the immense existential and monetary crisis, caused by skimmed throat competition due to ‘below cost’ pricing and that operations have a cut-off. The competitions have an option of elevating tariffs unilaterally to correct the circumstance, but that is “easier said than done” provided the profoundly competitive nature of the market. Airtel presumes the industry demanded an unprecedented intervention according to the orderly conduct of the players. According to Airtel, post two years will definitely dissolute the telecom business if the unlucrative value of Vodafone-idea exists.

The business operations of Vodafone-Idea as compared to Airtel and Jio
The business operations of Vodafone-Idea as compared to Airtel and Jio.( Source-Google Picture)

Why Google buying stake of Vodafone – Idea

Google itself has a giant business not only in India but in every section of the world, except China. In India due to its huge population rate, google earned with a huge first-time user. Google offers as a test-bed for exposure in smartphone technology. Any kind of investments by Google in Vodafone-Idea at the crisis stage of Vodafone-Idea will surely gain the company’s monetary facts and its worthies to exist in the market. The company of Vodafone-Idea is started to carry the dilemma is there any kind of upcoming execution since last year of October. On that time Supreme Coury of India asked the company to pay a large amount of money, that is Rs. 58,254 crore to accommodate the gross revenue dues. This payment is not an option, it is mandatory for the company to pay. So far, the company has paid only Rs.6,854 crore and its future is in the decisional model which relies upon the permission of Supreme Court to the company to provide some relaxation over 20 instalments.

The company displayed a net loss of Rs.6453 crore during the October to December on a revenue of Rs.11,089 crore. Though it is yet to declare its January to March quarter earnings, analysis at Credit Suisse have estimated a total loss of Rs.5,816 crore for the period. According to them, Vodafone-Idea has a major impact by COVID-19 even more than expected. Although the subscriber market share loss for the company in the near term would mitigate the account of the lockdown. The Ebitda will take the advantages from the improvement in Arpu as 70-80% of the ameliorated revenue will be succeeded through the Ebitda. 

On May , Vodafone Plc, which owns majority stake in Vodafone Idea, had said that it has decided to put the value on its Vodafone-Idea shares to zero. It also stated that it has a huge exposure of around a billion pound(Rs.8,400 crore) to the firm. This clearly defines that it has to contribute up to that much amount towards paying Vodafone-Idea’s liabilities on the terms and conditions agreed during the moment of signing the contract( Vodafone-Idea merger deal).

Google’s step to buy a stake in Vodafone

Internet warrior Google has initiated discernment to catch up to 5 per cent stake in Vodafone-Idea Ltd(VIL). If the deal become successful then Google will be going to have a platform where it can compete with the World’s Fastest-Growing Telecome Market Facebook.

Alphabet, the parent company of Google and Nest, among others, has consists a couple of rounds of discussions with VIL. Most of the investors have also provided interest in acquiring a stake in the programme. They, although, did not immediately unveil the names of the other investors those were in talks with VIL.

The assumed share profit between Vodafone-Idea and Google
The assumed share profit between Vodafone-Idea and Google. ( Source- Google Picture)

The assumed share profit between Vodafone-Idea and Google. ( Source- Google Picture)

On April, the Google group announced that they had made an advance payment of $200 million to Vodafone-Idea for amounts considered to be in September 2020. Vodafone Group has now stretched up the long stop date on its agreement to merge Indus Towers, it is a three-way joint association between Bharti Infratel, Vodafone-Idea and Vodafone Group) and Bharti Infratel to June 24.