With the Supreme Court getting tough in the enforcement of its order on adjusted gross revenue due, which runs into billions of rupees, Indian telecom companies are now scrambling to make payments to the telecommunications department.
Vodafone Idea, Bharti Airtel and Reliance Jio paid, respectively, 30.4 billion rupees, 19.5 billion rupees and 10.5 billion rupees to the telecommunications department towards deferred spectrum dues. These are essentially installment payments that are made by telcos for airwaves bought in past auctions.
Tata Teleservices, the defunct telecom arm of the salt-to-software Tata Group, paid an additional amount of about 20 billion rupees to the telecom department, on an ad hoc basis on its payments-due account. This payment was in addition to the 22 billion rupees it already submitted to the government. According to the telcom department, Tata Teleservices owes an estimated 140 billion rupees.
Vodafone Idea is the worst hit of the late payers as it has to pay about 530 billion rupees (US$7.45 billion), and that includes license fees, spectrum usage charges, interest and penalty charges to the department. It has so far paid 35 billion rupees and is hoping for some government relief, without which it has warned it may have to shut down its operations.
The company said it is not in a position to pay any more and its viability depends on some relief measures by the government.
Vodafone Group’s global CEO Nick Read sought a meeting with telecom minister Ravi Shankar Prasad on March 6. The meeting request was sent on February 28, but so far the minister’s office has not replied, the Financial Express reported, quoting unnamed sources.
In the past, Read as well as Vodafone Idea Chairman Kumar Mangalam Birla said they were not going to infuse any more equity in the firm.
Vodafone rival Bharti Airtel owed about 356 billion rupees ($4.95 billion). It paid 100 billion rupees on Monday.
A ruling by the Supreme Court late last year widened the scope of adjusted gross revenue to include income from non-core items. The dispute arose when telecom companies migrated to a new system offered by the government in 1999, under which operators agreed to share a certain percentage of revenue with the government.
This legal case dragged on for 14 years, with operators arguing that the revenue should be made up of income from telecom services. But the Department of Telecommunications said it should include all revenue earned by an operator, including non-core telecom operations. The court delivered its judgment last October in favor of the department.
The government is trying to provide some relief to telecom companies to ensure the sector will continue to have three private sector companies. It is trying to strike a balance with companies complying with the top court’s order, the health of the telecom sector and customer interests.
If Vodafone Idea collapses, it would cause significant job losses and have an impact across a range of sectors and the wider economy. The global perception of India as an investment decision would also take a beating.
The bailout options on the table include setting up a fund that will lend money to telcos at a concessional rate to repay their dues. Another one is of a revised payment plan, which will enable companies to defer payment of penalties and interests. The government is also mulling a proposal to issue soft loans to Vodafone Idea.