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Explained: Why Vodafone-Idea may shut down soon

​Vodafone-Idea may shut down soon. It is not a speculation. Vodafone Idea Limited Chairman Kumar Mangalam Birla has himself admitted to the plunging fortunes of the company. Birla on Friday said Vodafone Idea Ltd would shut down if the government does not provide relief on the liability it faces in past statutory dues following a Supreme Court order.

India TV News Desk India TV News Desk
New Delhi Updated on: December 06, 2019 17:27 IST
Why Vodafone-Idea may shut down soon

Why Vodafone-Idea may shut down soon

Vodafone-Idea may shut down soon. It is not a speculation. Vodafone Idea Limited Chairman Kumar Mangalam Birla has himself admitted to the plunging fortunes of the company. Birla on Friday said Vodafone Idea Ltd would shut down if the government does not provide relief on the liability it faces in past statutory dues following a Supreme Court order. 

On being asked about the future of Vodafone Idea in absence of a government relief on a payment of Rs 53,038 crore dues, Birla said: "If we are not getting anything then I think it is the end of the story for Vodafone Idea."

It was only last year that Birla's Idea Cellular and British Telecom giant Vodafone plc's India unit merged 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 end of story for us. We will shut shop," he said in a response when asked if Vodafone Idea will put in more money.

Chairman Kumar Mangalam Birla, however, said he was 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.

License fee, spectrum usage charge, penalty

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. And this comes with interest and penalty for the past 14 years. Both Airtel and Vodafone Idea petitioned the government seeking relief in waiver of interest and penalty, which will halve the dues. They have also filed a review petition in the Supreme Court.

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. 

ALSO READ | Kumaramangalam Birla on Vodafone Idea: Will have to shut shop; shares tumble

ALSO READ | Vodafone Idea tumbles 5 pc on Birla's statement that firm may have to 'shut shop' if no relief given

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