India's third-largest telecom company with over 300 million subscribers, Vodafone Idea’s financial position is so precarious that it will be forced to shut operations if the Centre does not offer a fiscal package for the telecom sector. Kumar Mangalam Birla, chairman of Vodafone Idea and head of the Aditya Birla group said, “It does not make sense to put good money after bad. That would be the end of the story for us. We will shut shop.”
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 £11.7 billion 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. Birla said that it does not make business sense to invest further into the operations.
Telecom sector needs stimulus to survive: Birla
Vodafone Idea, and the equally troubled Bharti Airtel, have petitioned the government for relief, saying absence of a bailout may weaken their ability to run the business. While the government recently gave the two companies - and their profitable rival Reliance Jio - a two-year moratorium on statutory spectrum payment (worth £4.2 billion), the companies feel it is not enough. Airtel and Vodafone Idea have now petitioned the government for relief in waiver of AGR interest and penalty, which could halve the dues, and also filed a review petition in the Supreme Court.
“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,” Birla said, adding, “I think we can expect much more stimulus from the government because it is required for the sector to survive.” Asked about the specific relief that he is seeking, 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.”
He said the government can work out a solution out of the mess. “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.”
