Top Court Agrees to Hear India Rescue Plan for Telecom Firms

(Bloomberg) -- India’s top court agreed to consider a government plan designed to rescue the nation’s beleaguered mobile-phone service providers, with riders.

The Supreme Court on Thursday sought the government’s response on what guarantees the court can seek to ensure telecom companies abide to a timeframe and payment schedule it decides. Prime Minister Narendra Modi’s government had sought approval for several telecommunications firms, including Vodafone Idea Ltd., to pay combined back-fees worth 1.4 trillion rupees ($19 billion) over 20 years.

The three-judge panel headed by Justice Arun Mishra also asked the government to reconsider demand for similar dues from state-run companies, such as Gail India Ltd. and Power Grid Corp. of India as that was “wholly impermissible,” Mishra said.

While the latest hearing also helps Bharti Airtel Ltd., it comes as a relief particularly to Vodafone Idea, which is struggling with mounting losses and more than $14 billion of debt. Billionaire Kumar Mangalam Birla, the chairman of the local joint venture with U.K.’s Vodafone Group Plc, warned in December that the company was headed toward insolvency in the absence of any aid.Consumers will “suffer if there’s adverse impact on the telecom sector,” India’s Solicitor General Tushar Mehta said in court.

Investors, however, don’t like the uncertainty that accompanies what are typically lengthy legal proceedings in India. Vodafone Idea’s shares tumbled about 13% in Mumbai on Thursday.

“It was widely expected that the Supreme Court would not make much fuss about extending the payment terms,” said Neerav Dalal, an analyst at Kim Eng Securities Pvt. “So it’s just getting delayed and that’s playing on Vodafone’s stock.”

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