The telecom industry has been undergoing a lot of financial pressure since October. The things have gone downhills for the incumbent telecom operators, Bharti Airtel and Vodafone Idea ever since the Supreme Court announced its verdict on the Adjusted Gross Revenue (AGR) definition, thus putting a massive burden of Rs 90,000 crore worth of dues on both of these companies. However, the worst-hit among the two is Vodafone Idea which is currently India’s third-largest telecom operator. A few words have come from the chairman of the company Kumar Mangalam Birla who has said that Vodafone Idea will shut shop if there is no relief from the government. It is worth noting that the telcos under pressure have been asking for government relief on the dues. Until now, these telcos have been given a two-year payment moratorium on the payment deadlines, but apart from this single relief, there is nothing more to the rescue of these telecom companies. The billionaire chairman of the company spoke at HT Leadership Summit when asked about Vodafone Idea, "If we are not getting anything, then I think it is the end of the story for Vodafone Idea.”
Vodafone Idea Could Shut Down in Absence of Relief: Chairman
After the data tariff war bruised the telecom industry and Vodafone India and Idea Cellular found themselves unable to compete with the Mukesh Ambani led telecom operator, Reliance Jio, given its dirt-cheap data rates, the two companies decided to merge their operations. In the process, the merged entity was rendered in a debt of Rs 1.17 lakh crore which still remains on the head of Vodafone Idea. After this blow, the telecom company received another blow in the form of AGR decision which put a further financial pressure of Rs 40,000 crore or more on the company, accounting which, the telecom operator posted the most massive loss in the Indian corporate history.
When asked about whether or not Vodafone Idea would pour more money into the business, Kumar Mangalam Birla said, "It does not make sense to put good money after bad. That would be end of story for us. We will shut shop.” Not only Vodafone Idea, but other telecom companies including Bharti Airtel also has to pay combined dues of Rs 1.47 lakh crore for spectrum usage fees, license fees, interests, penalties and interests on penalties for the last 14 years.
Telcos Ask for Relief from Government
In their quest for relief from the government, both Bharti Airtel and Vodafone Idea have filed a review petition in the Supreme Court to ask the bench to reconsider the quantum of dues which the companies have to pay. If the interests and penalties for the telcos are waived, then the total dues would be cut down by half as most of the chunk of these dues are made up by the interests and penalties only.
Telecom Sector Important for the Country
With this Kumar Mangalam Birla also added that the government realises that the persistence of the telecom sector is imperative for India because it drives the GDP as well and it also supports the Digital India programme. He also added that the government wants three private players in the industry and one public player. But, with this, he also added that if no relief is found from the government, then it would be the end of the story for Vodafone Idea. It is worth noting that the increase in the calculation of the AGR given that now it includes non-core services too means that the telcos will have to pay higher license fees and Spectrum Usage Charge.