Vodafone Idea will have to be closed down if the government doesn’t provide relief that the company has sought, its chairman Kumar Mangalam Birla said on Friday.
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“If we we are not getting anything then I think it is end of story for Vodafone Idea,” Mr. Birla said at the HT Leadership Summit when asked about the future of Vodafone Idea in absence of a government relief on payment of ₹53,038 crore dues.
Mr. Birla indicated that his group will not invest any money in the company in the absence of relief from the government.
“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.
Mr. Birla said the company will have to opt for insolvency route in the absence of relief.
Birla expects stimulus from government
Mr. 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 ₹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, Mr. 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.
Vodafone Idea stocks tumble
Vodafone Idea shares crashed about 9% following Mr. Birla's remark. 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.
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.
