Birla Warns Of Vodafone Idea Shutdown If There’s No Government Relief

Aditya Birla Group Chairman Kumar Mangalam Birla has warned of a Vodafone Idea shutdown if the government doesn’t provide relief on the liability it faces on past statutory dues following a Supreme Court order.

Shares of the debt-laden telco fell as much as 9 percent after Birla’s comments but pared some of the losses to end the day 5.48 percent lower at Rs 6.90 apiece.

"If we 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 Vodafone Idea Ltd. in the absence of a government relief on payment of Rs 53,038 crore dues.

Billionaire Birla's Idea Cellular and British Vodafone Group Plc's India unit had merged last year, amid a price war effected by Reliance Jio Infocomm Ltd., the telecom upstart of Asia’s richest man Mukesh Ambani. In the process, it accumulated Rs 1.17 lakh crore debt.

"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 Vodafone Idea will put in more money.

Bharti Airtel, Vodafone Idea and other telecom players have to pay as much as Rs 1.47 lakh crore in payment of telecom license fee and spectrum usage charge together with interest and penalty for past 14 years.

Both Airtel and Vodafone Idea have petitioned the government for relief in waiver of interest and penalty, which will halve the dues, and also filed a review petition in the Supreme Court.

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 an over-six-year low GDP growth of 4.5 percent. "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.

Birla’s comments follow those made by Vodafone Group Plc's Chief Executive Officer Nick Read that the company’s India venture may be headed for liquidation unless the government eases off on demands for mobile spectrum fees.

"If you don’t get the remedies being suggested, the situation is critical,” Read said at a press round-table in London on Nov. 12. ”If you’re not a going concern, you’re moving into a liquidation scenario—can’t get any clearer than that.”

Days later, Vodafone Idea posted the biggest quarterly loss in India’s corporate history as it set aside money for dues pending to the government related to the 14-year-old adjusted gross revenue dispute.

To be sure, the government has been working on a telecom relief package, as part of which it has deferred spectrum-related dues for two years beginning April 2020, Finance Minister Nirmala Sitharaman said on Nov. 20.

"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,” Birla said at the HT event.

"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.

(With inputs from PTI and Bloomberg)