No respite for Vodafone Idea amid vendor trouble, nearly 1,500 more laid off

Nokia and Ericsson that had letters of credit from banks against previous orders, are again asking for similar guarantees from banks for new orders, the sources said. And that appears to be a difficult task. The carrier told the Supreme Court rece...

NEW DELHI/MUMBAI: Telecom gear vendors Nokia, Ericsson, Huawei and ZTE are delaying taking new orders for 4G equipment from Vodafone Idea for now, fearing they may not be able to recover payments from the cash-strapped telco, multiple persons familiar with the development told ET.

The development is slowing Vodafone Idea’s expansion plans, making it vulnerable to more subscriber losses.

In a bid to cut costs further, the loss-making operator is believed to have laid off nearly 1,500 employees after consolidating circles to 10 from 22, people said.


"This has been happening since the last six months or so. European vendors have taken a stand that they need some security against new orders. Chinese vendors that already had flexible payment terms may have also stopped taking new orders,” said one of the persons.

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European vendors Nokia and Ericsson that had letters of credit from banks against previous orders, are again asking for similar guarantees from banks for new orders, the sources said.
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And that appears to be a difficult task. The carrier told the Supreme Court recently that no bank was willing to provide any guarantees, given its debt — 112,520 crore at March end — a completely eroded net worth and existential crisis owing to the over 50,000 crore that it still owes the government in adjusted gross revenue (AGR) dues.

Chinese vendors Huawei and ZTE had more flexible payment terms with one and three years’ payment time, respectively. But both are sceptical about the telcos' ability to clear remaining payments for previous orders and are delaying delivery of new equipment, sources said.

VIL, Nokia, Ericsson and ZTE did not respond to ET’s requests for comment till press time.

Huawei said the Indian telecom industry was going through a tough time, but added that business ties with Vodafone Idea continued. “We fully support them for their world’s largest network integration and capacity enhancement.” But a senior official admitted there have been payment delays.
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Vodafone Idea owes vendors 3,500-4,000 crore cumulatively for equipment supplies, as per industry estimates. Vendors are anxiously awaiting the outcome of the Supreme Court’s AGR ruling on whether telcos like Vodafone Idea and Bharti Airtel will be given a longer tenure to pay up their AGR dues.

"Vodafone Idea needs new equipment for capacity expansion,” a second person said.
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Several people said Vodafone Idea’s requirements for new equipment such as “radio and core” is lower than earlier, given the sharp fall in its user base – it has lost 117 million users since the Vodafone India-Idea Cellular merger in August 2018.
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