Vodafone Idea’s plans for 4G network expansion hit a snag, as international vendors refuse new orders

Published: 4 August 2020 - midnight

The world’s top network equipment providers have temporarily delayed accepting any new orders from India’s beleaguered telco Vodafone Idea, fearing that they may be unable to make payment for the goods, according to reports in the Indian press.

A report in the Economic Times of India suggests that Ericsson, Huawei, Nokia and ZTE have all temporarily halted new orders of network equipment to Vodafone Idea, with sources claiming that the vendors are now asking for securities or upfront payments from the cash strapped telco.

"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 as well," sources told journalists from the Economic Times.

The move places Vodafone Idea in the middle of a vicious cycle. Unable to invest in the expansion of its profitable 4G services leaves the company vulnerable to further subscriber losses, which will inevitably drive revenues down and worsen the firm’s financial status.

Vodafone Idea was previously India’s biggest telco, when its parent companies merged in August 2018. Since then, it has haemorrhaged subscribers at an alarming rate and has surrendered its position as the country’s biggest telco to Reliance Jio and is now neck and neck with its rival Bharti Airtel in the race for second place.

Previously, European vendors have required letters of guarantee of payment from Indian banks before proceeding with orders from Vodafone Idea. However, during the recent AGR case hearing at India’s Supreme Court, representatives from Vodafone Idea said that they were no longer able to secure such guarantees from any of the banks they work with.

The ET report estimates that Vodafone idea owes more than $450 million (3,500 crore rupees) to international equipment vendors.

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