Vodafone Idea outlook still critical, says parent

  • The telco is actively seeking various forms of relief from the government
  • India’s top telcos have to cough up over 1 tn in dues, heavily straining their financials

Navadha Pandey
Updated6 Feb 2020
Vodafone Idea, will have to shut shop if there is no relief from the government following the adjusted gross revenue, or AGR, verdict.
Vodafone Idea, will have to shut shop if there is no relief from the government following the adjusted gross revenue, or AGR, verdict.

UK-based Vodafone Group Plc on Wednesday said that the outlook for Vodafone Idea Ltd, its telecom joint venture with the Aditya Birla group in India, remains critical and the company is seeking relief from the Indian government.

“In October, the Supreme Court gave an adverse judgement in the adjusted gross revenue (AGR) case against the industry. The outlook for Vodafone Idea remains critical,” Vodafone Group said in a statement announcing its December quarter earnings on Wednesday.

“The company is actively seeking various forms of relief from the Indian government to ensure that the rate and level of payments it makes to the Indian government is sustainable and it can meet its other commitments as they fall due,” the group said.

The 24 October court order that ended a 14-year legal battle between telcos and the department of telecommunications (DoT) asked India’s top wireless carriers to cough up more than 1 trillion in dues, straining their already precarious financial situation.

Telecom operators had challenged the method adopted by the department of telecommunications to calculate AGR. Licence and spectrum charges are calculated at 8% and 3-5% of AGR, respectively.

While the telcos said AGR refers only to revenues from telecom, DoT insisted that it includes all revenues.

The Supreme Court upheld the government’s definition of adjusted gross revenue and asked operators to pay past dues by 24 January.

Airtel owes 35,586 crore to DoT, Vodafone Idea over 50,000 crore, and Tata Teleservices, which has sold its mobile services business to Airtel, owes 14,000 crore.

In December, Aditya Birla Group chairman Kumar Mangalam Birla said that the group’s telecom unit, Vodafone Idea, will have to shut shop if there was no relief from the government following the AGR verdict.

Vodafone Idea, Bharti Airtel and Tata Teleservices have sought more time to pay AGR-related dues and last month filed a modification plea in the Supreme Court to negotiate a sustainable payment schedule with the DoT, which has issued demand notices for revenue share, interest and penalty.

Bharti Airtel’s petition said it would need more time to calculate dues across 22 telecom circles over the last 15 years, which is a complex process.

Vodafone Idea, meanwhile, said it does not have the resources to pay such huge amounts.

As such, if suitable payment terms are not made available, it will lead to the immediate closure of one of the largest and oldest telecom companies in India, causing disruption to 300 million subscribers and putting lakhs of jobs at risk, its petition said.

The court is likely to hear the modification pleas next week.

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