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Vodafone Idea will shut shop if there is no government relief: KM Birla

Birla said the company will have to opt for insolvency route in the absence of relief from govt.

ET Bureau|
Updated: Dec 07, 2019, 09.16 AM IST
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Vodafone Idea will close if govt does not provide any relief: KM Birla
Vodafone Idea will close if govt does not provide any relief: KM Birla
NEW DELHI: Vodafone Idea may have to shut if there’s no relief on the statutory dues that the telco has to pay by January end, said chairman Kumar Mangalam Birla. “If we are not getting anything, then I think it is end of story for Vodafone Idea,” Birla said at an event in New Delhi on Friday. “It does not make sense to put good money after bad… We will shut shop.”

Vodafone Idea fell 5.34% to Rs 6.92 at close on the BSE Friday.

The third-largest telco in the country has to pay Rs 53,038 crore following the October 24 Supreme Court verdict that broadened the definition of adjusted gross revenue (AGR) to include non-core items. The amount could go up, the government has said.

Birla was however hopeful of government support, not just for the telecom sector, but for industry as a whole to revive the economy, which slumped to a six-year low of 4.5% growth in the September quarter.

The government, he said, has publicly stated that it wants three companies from the private sector and one from the public sector in telecom to ensure that users are well served by competition.

“They have realised the fact that this (telecom) is a critical sector. The whole Digital India programme rests on this. This is a strategic sector,” he said. “I think that we can expect much more stimulus from the government because it is required for the sector to survive.”

Birla’s comments echoed those of Vodafone Group CEO Nick Read last month that without government relief, the future of the India JV was in doubt and that the UK company wouldn’t be infusing any further equity into the venture.

Co has Filed Review Petition
However, Read later apologised to the Indian government and said his comments had been distorted, thanking it for setting up a committee of secretaries to devise a relief package for the stressed sector.

Vodafone India and Birla-owned Idea Cellular were forced to merge last year amid intense competition in the sector that’s burdened by debt of more than Rs 7 lakh crore.

The government is well placed to help resolve the matter, Birla said.

“The big elephant in the room is AGR, which is actually I think something which lies in the court of the judiciary,” Birla said. “I believe government can have a dialogue. This was a suit filed by the government against telecom service providers. Since the government has won, it gives them headroom to talk to judiciary and try to find some solution. I don’t know which form or shape it takes.”

Vodafone Idea posted India’s worst ever corporate loss of over Rs 50,000 crore in the September quarter as it set aside nearly Rs 26,000 crore toward AGR dues. It has expressed doubts about continuing as a going concern if made to pay the entire AGR dues amount.

The loss-making telco has filed a review petition in the apex court, hoping for a reduction in penalties and interest, which account for 75% of the dues. The telco also wants the court to take another look at some of the non-core items that are to be included while calculating AGR.

ET had reported November 14 that the Aditya Birla Group would not infuse any further equity in its telecom joint venture with the Vodafone Group of UK, and let it opt for insolvency if the government does not provide substantial relief, including on the AGR-based dues. Increased tariffs and a two-year moratorium on spectrum payments by the government may not be enough, analysts have said.

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