Vodafone Idea to shut shop if no relief given, says Kumar Mangalam Birla

By: and |
New Delhi | Published: December 7, 2019 5:11:39 AM

Kumar Mangalam Birla, chairman of Vodafone Idea (VIL), says since govt won AGR case in SC, it gives them headroom to talk to judiciary and try to find some solution.

Kumar Mangalam Birla, chairman of Vodafone Idea, Vodafone Idea, AGR case, supreme court, vodafone idea share, vodafone idea news, vodafone idea kumar mangalam birlaBirla was, however, hopeful of relief from the government not just for the telecom sector but the industry as a whole to boost the economy facing a six-year low GDP growth of 4.5%.

Kumar Mangalam Birla, chairman of Vodafone Idea (VIL), on Friday categorically said that the company will shut shop if the government does not provide relief on the payment of dues arising out of the Supreme Court’s order relating to computation of adjusted gross revenue (AGR).

Birla’s comments come at a time when the company, apart from Bharti Airtel and others, has filed a limited review petition in the Supreme Court seeking waiver of interest, penalty, and interest on penalty. If the company does not get any relief from the SC, it needs to pay Rs. 53,039 crore to the government by January 24, 2020 towards licence fees and spectrum usage charge dues. The interest, penalty, and interest on penalty comprise around 75% of Vodafone Idea’s total dues.

“If we are not getting anything then I think it is end of story for Vodafone Idea,” Birla said at the HT Leadership Summit when asked about the future of the company in abse-nce of a government relief on the payment of dues. “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 when asked if Vodafone Idea will put in more money.

Birla was, however, hopeful of relief from the government not just for the telecom sector but the industry as a whole to boost the economy facing a six-year low GDP growth of 4.5%.

“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,” he said.

The government had late last month given two years to telecom companies to pay the dues for spectrum they bought in past auctions. This relief totalled Rs 44,000 crore for the industry but companies are expected to pay these dues 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”, adding, “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.

Vodafone Idea owes Rs 28,309 crore to the government as licence fee dues and another Rs 24,730 crore towards spectrum usage charge. If the company shuts shop, the government will also stand to lose around Rs 2 lakh crore as the company owes this amount to it by way of deferred spectrum installments and one-time spectrum dues.

Vodafone and Idea Cellular had merged in August 2018 to face the competitive pressure which emerged with Reliance Jio starting services from September 2016 at below cost tariffs. In the process, it accumulated Rs 1.17 lakh crore debt and last month posted the biggest quarterly loss in corporate India’s history at Rs 50,922 crore. This was on the back of provisioning Rs 25,680 crore for AGR payments.

Telecom industry on the whole needs to pay Rs 1.47 lakh crore dues as a result of the SC order on AGR by January 24, 2020. After Vodafone Idea, the next big amount is due from Bharti Airtel totalling Rs 35,586 crore.

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