Tata Communications terminates deal with Vodafone-Idea, here's what the company said

Cash-strapped telecom operator

Vodafone Idea

(Vi) faces a new challenge after

Tata Communications Transformation Services

(TCTS) reportedly terminated a service contract due to unpaid dues. According to a report in Economic times,

Vodafone

Idea has said services to its customers won’t suffer despite a unit of

Tata Communications

terminating a service contract as the work will now be insourced.

What Vodafone said
In a statement to ET, Vodafone spokesperson said, "“In view of TCTS’s decision to exit some managed services, both parties have agreed to a planned transition. VIL will now insource these services like the other telcos already have.” “This was also the model followed by the company prior to these services being outsourced to TCTS. This will not impact VIL’s services to its customers,” the spokesperson added.
While Vi maintains customer services won't be affected by insourcing the work, analysts see this as a worrying sign for the company already struggling to raise funds. “For the first time, a big vendor has publicly announced termination of services to Vi, which does not bode well for the company going forward,” Rohan Dhamija, head (India & Middle East) at Analysys Mason.

Vodafone Idea failed to clear Rs 221.19 crore worth of dues to TCTS, who handled crucial maintenance work for Vodafone Idea's fiber assets. While Vi is said to be clearing its debt obligations to lenders and banks in a timely manner, the dues towards vendors are being delayed.
Facing critical financial issues
Key infrastructure provider Indus Towers also expresses concern over mounting Vi debt. Airtel CEO Gopal Vittal even voiced worries about stalled progress in debt recovery. Besides Indus, Vi needs to pay other vendors such as American Tower Corp (ATC), Nokia and Ericsson.

The joint venture between UK’s Vodafone Group Plc and India’s Aditya Birla Group (ABG) has been battling cash flow issues, hindering capital expenditure and vendor payments. Hence, the company has been unable to seal 5G network equipment supply deals with vendors.
Vi had ended the second quarter with Rs 2.12 lakh crore net debt and a cash balance of Rs 119.6 crore. Its dues to banks and financial institutions stood at Rs 7,860 crore at the end of September. As per the company’s books, existing debt payable by September 30, 2024, is Rs 7,174 crore.