Axiata Group Berhad has sold its residual stake in Vodafone Idea (VIL) and exited India’s telecom sector, having taken a substantial hit on its investments after a high-profile entry more than a decade ago.
The Malaysian telco’s exit leaves only SingTel and Vodafone Group from among the old-time foreign investors in the debt-laden sector. Intense competition exacerbated by Reliance Jio’s entry in September 2016 with free voice calls and dirt-cheap data rates has already forced foreign carriers such as Norway’s Telenor, Russia’s Sistema JSFC, Japan’s NTT DoCoMo and Malaysia’s Maxis to exit the Indian telecom market.
Axiata had entered erstwhile the Idea Cellular back in 2008, splurging nearly $2 billion for a 20% stake in the carrier. It has seen the value of its holding plunge sharply over time, initially with Idea and then with Vodafone Idea, which has also seen its market-cap fall sharply and net worth shrink. Huge losses in the face of intense competition in the Indian telecom market, aggravated further by the adjusted gross revenue (AGR) dues crisis, have pushed VIL to the brink.
At the time of VIL’s merger two years ago, Axiata’s 8.15% stake in the company was valued at roughly Rs 3,520 crore, with the merged entity then commanding a market cap of around Rs 43,200 crore. But thereafter, Axiata’s stake fell sharply to 2.48% after it chose not to participate in VIL’s Rs 25,000 crore rights issue early last year by renouncing its shares entitlement.
VIL’s subsequent shareholding pattern filings show Axiata’s stake got further diluted to 1.62% in the quarter to June 2019, and to 1.05% in the quarter ended December 2019. Eventually, Axiata is reckoned to have fully exited VIL in the March quarter, people aware of the matter told ET.
In fact, as on March 31, VIL’s share price had plunged to Rs 3.11 and its market-capitalisation had shrunk to a modest Rs 8,937 crore, valuing Axiata’s 1.05% stake at around a paltry Rs 94 crore.
Shares of VIL, which continues to lose revenue and millions of customers amid fierce competition, closed 2.3% lower at Rs 8.51 on the BSE Thursday, giving it a market cap of Rs 24,453.82 crore.
Axiata did not respond to ET’s queries.
On ET’s specific query that Axiata had cashed out as VIL’s survival remains uncertain amid the AGR crisis, VIL said that “it remains committed to serve” nearly 280 million customers across the country.
Analysts say Axiata’s exit from the India market was always on the cards, especially after it decided not to participate in VIL’s rights issue. They also note that even before the Vodafone-Idea merger, Axiata had not participated in Idea’s qualified institutional placement (QIP) in February 2018.
“Axiata’s decision not to participate in VIL’s rights issue was the first clear signal that it may be looking at an early exit, especially as its investment was of a non-strategic nature,” said Rajiv Sharma, research head at SBICap Securities.
He added that the lack of clarity on whether VIL will be allowed to stagger its AGR payments, and its implications on survival, also possibly created more business uncertainty for long-term financial investors and acted as a catalyst for speeding up Axiata’s exit.
Source: Economic Times