Kumar Mangalam Birla: “Vodafone Idea may have to shut shop”

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India’s third largest mobile service provides, Vodafone Idea Limited said if the government will not offer relief on the liability which the company faces following the Supreme Court order, the company will have to shut down, said Kumar Mangalam Birla, Chairman, Vodafone Idea Limited. At the HT Leadership Summit when Birla was asked about the future of the company if there will be no relief provided from the government on dues of over Rs. 53,000 crores he said “if we are not getting anything then I think it is the end of the story for Vodafone Idea”.

Birla’s Idea Cellular and British giant Vodafone’s India unit merged in 2018 to compete against the storm brought by Reliance Jio with its free calling and highly reduced data rates. In order to compete against Jio, the company amassed debt of Rs. 1.17 lakh crore and just last month posted a loss of almost Rs. 51,000 crore.

Read the articles here: Vodafone Rs. 50,933 loss

When Birla was asked whether more money will be invested in Vodafone Idea Limited, he replied “It does not make sense to put good money after bad. That would be end of story for us. We will shut shop”. In total the telecom sector (all companies dealing in telecom services) owes around Rs. 1.47 lakh crore in payments of spectrum usage, license fees along with the interest and penalties accumulated over the past 14 years.

Both Airtel and Vodafone Idea have filed petition seeking relief in waiver of penalties and interests from the government. If this is accepted by the government, their dues will be halved. Birla said, the relief from the government will not just aid the telecom sector but will help the industry as a whole to pull out Indian economy from 6 year low GDP growth of 4.5%.

He said “The (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 added “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”.

Vodafone Group Plc. CEO, Nick Read, in early November, indicated Vodafone will have to leave India if taxes are not lowered. Read the Article here: Vodafone Threatening India?

Near the end of November 2019, government deferred the due payments of telecom companies for the spectrums they had bought in the past by 2 years. The relief totalled up to Rs. 44,000 crores for the industry however, the companies will have to pay these dues along with interest after 2 years.

When Birla was asked about the specific relief he sought, he said “the big elephant in the room is AGR (Adjusted Gross Revenues), which is actually, I, think something which lies in the court of judiciary. I believe the government can have a dialogue. This was a suit filed by the government against telecom service providers”.

AGR is the percentage that the telecom companies have to pay as the statutory dues. Recently the top court upheld government’s position which says that the non-telecom revenues have to be included in the AGR while calculating dues. On this Birla said “since the government has won, it gives them headroom to talk to the judiciary (courts) and try to find some solution”.

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