Vodafone Idea Might Shut Down Operations If Govt Does Not Provide Relief in AGR Matter

The telecom operators are facing a massive crunch with the impending AGR dues and the massive quantum of these dues

Highlights
  • The telecom industry has dues worth Rs 1.4 lakh crore or more
  • The worst hit telecom operator is Vodafone Idea
  • Bharti Airtel and Vodafone Idea have to pay Rs 90,000 crore or more to the DoT

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-operations-shutdown

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.

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Arpit spends his day closely following the telecom and tech industry. A music connoisseur and a night owl, he also takes a deep interest in the Indian technology start-up scene and spends rest of his time spilling poetry and stories on paper.

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Baburao Ganpatrao Apte

Mr.K.M.Birla should just approach SoftBank Group, which has experience in running telecom companies with Sprint in USA, and their very own SoftBank Corp., in Japan, if they are willing to takeover, sell it off Mr.Birla! Should such a deal goes through, it would be good for the Indian telecom sector, SoftBank with their Vision Fund kitty shall have no problem in ramping up 4G LTE/5G investment in Indian telecom infrastructure, where Vodaidea lacks e.g., like PAN India robust network(gist of comments here from Vodaidea users from different parts of India). They run a Vision Fund with $100 Billion(Wikipedia), acquistion shouldn’t… Read more »

Nature lover

Baburao :

Even softbank would have shutdown in India if it was started because of high spectrum fees and tax.

Girish Gowda | BengaLuru

This is a bad time to close shop. Jio has shown the true potential of the Indian telecom market where there is a lot of profits to be made in the future on every single person if their investments are wise and customer satisfaction is good. No longer do maids or hawkers or even daily wage labourers shy away from recharging for 150-200rs per month for their entertainment, connectivity and for the future of their kids who can educate themselves on the internet. Internet is penetrating the middle and poor class like a wildfire. It will be a basic necessity… Read more »

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