Vodafone Idea Ltd, India's one of the largest telecom service provider, is on verge of shutdown if the government does not provide relief on the liability it faces in past statutory dues following a Supreme Court order, said its billionaire chairman Kumar Mangalam Birla on Friday.
Vodafone Idea shares crashed about 9 per cent on Friday, spooked by company's chairman Kumar Mangalam Birla statement. Its stock was trading 8.89 per cent lower at Rs 6.66 apiece on the BSE.
On the NSE, the scrip fell 8.22 per cent to Rs 6.70 a unit. On Thursday, Vodafone Idea shares fell over 5 per cent after Brickwork Ratings downgraded the telecom operator's rating on non-convertible debentures (NCDs)
Birla's Idea Cellular and British telecom giant Vodafone plc's India unit had merged last year to compete with the onslaught of free voice calling and dirt cheap data unleashed by richest Indian Mukesh Ambani's Reliance Jio.
In the process, it accumulated Rs 1.17 lakh crore debt and had just weeks back posted corporate India's biggest loss after it provisioned for the liability arising from the Supreme Court upholding the government's position on what base should statutory liabilities be calculated.
"It does not make sense to put good money after bad. That would be the end of the story for us. We will shut shop," he said in response when asked if Vodafone Idea will put in more money.
Market leader Bharti Airtel, Vodafone Idea and other telecom players have to pay as much as Rs 1.47 lakh crore in payment of telecom license fee and spectrum usage charge together with interest and penalty for past 14 years.
Both Airtel and Vodafone Idea have petitioned the government for relief in waiver of interest and penalty, which will halve the dues, and also filed a review petition in the Supreme Court.
Birla was however hopeful of a relief from the government not just for the telecom sector but the industry as a whole to pull out the economy from a six-year low GDP growth of 4.5 per cent.
"They (the government) have realised the fact that this (telecom) is a very critical sector. The whole digital india programme rests on this. This is a strategic sector," he said.
The government, he said, has publicly stated that it wants three players from the private sector and one player from the public sector.
"I think that we can expect much more stimulus from the government because it is required for the sector to survive. If we weren't getting anything then I think it is end of story for Vodafone Idea," he said.
The government had late last month deferred by two years the payment due to telecom companies for spectrum they bought in past auctions. This relief totalled Rs 44,000 crore for the industry but companies are expected to pay this due together with interest after the two year moratorium.
Asked about the specific relief sought, Birla said, "The big elephant in the room is AGR. Which is actually I think something which lies in the court of judiciary. I believe government can have a dialogue. This was a suit filed by the government against telecom service providers."
AGR refers to adjusted gross revenues, a percentage of which the telecom companies pay as statutory dues. The Supreme Court had upheld the government position that non-telecom revenues have to be included in the AGR for calculating dues.
"Since the government has won, it gives them headroom to talk to judiciary and try to find some of solution. I don't know which form or shape it takes," he added.
(With inputs from PTI)