Vodafone Idea Chairman Kumar Mangalam Birla met telecom secretary Anshu Prakash on Tuesday amid raising concerns that the company may head to insolvency if the government takes coercive action against the telecom companies for failing to pay AGR dues. Vodafone Idea is a joint venture between Britain’s Vodafone Group Plc and India’s Idea Cellular. On Monday, Vodafone Idea paid ₹2,500 crore as part payment of dues to the department of telecommunications (DoT). It has promised to pay another ₹ 1000 crore by Friday. Vodafone Idea owes ₹ 53,000 crore in total. The Supreme Court had already rejected its appeal for extending the AGR dues payment deadline.
Supreme Court has directed telcos to pay AGR dues in full by March 17. Vodafone is the worst-hit among telcos that have AGR dues. As of December 2019, Vodafone Idea had Rs.12,530 crores of cash and equivalent reserves.
Kumar Mangalam Birla's meeting with Anshu Prakash, telecom secretary, in New Delhi comes after the Supreme Court rejected Vodafone Idea Ltd's petition that urged for direction to telecom department not to invoke its bank guarantee for recovering AGR related dues.
“If the bank guarantees get encashed, then the company will have to close,” Vodafone Idea’s counsel Mukul Rohatgi told a TV channel on Monday.
However, when asked by reporters if Vodafone Ideas was considering insolvency, Vodafone Idea Chairman Kumar Mangalam Birla said, "Can not say anything at the moment." A visibly tensed Kumar Mangalam Birla did not elaborate further.
Earlier on Monday, Mukul Rohatgi also said NDTV that if Vodafone Idea collapses more than 10,000 people will be jobless.
The State Bank of India has already warned against the idea of Vodafone Idea shutting down. According to a Reuters report, Vodafone Idea has 13,000 direct employees and loans from banks of about $3.8 billion.
Vodafone Idea’s exit will surely send shockwaves through India’s economy, that is at its slowest pace in 11 years.
State Bank of India has already expressed concern on the situation and said banks will have to pay the price if any telecom company shuts down.
Besides the AGR dues, Vodafone Idea's gross debt, excluding lease liabilities, was Rs 1,15,850 crore as on December 31, 2019, including deferred spectrum payment obligations of Rs 88,530 crore due to the government.
The next day of hearing for telcos with AGR dues is March 17.
Meanwhile, Reuters quoting two official sources said the government was seeking to come up with a plan that did not violate the court’s order.
“(The government) is concerned with what is happening in the sector and its impact on the investment climate,” Reuters quoted a top Finance Ministry official.