Two of India’s biggest telecom companies, Vodafone Idea and Airtel, seem to have run out of talk time. India’s Supreme Court, in a brutally delivered lashing to the companies’ lawyers, denied their request for getting out of paying a fine that could end up costing them a combined total of $10.3 billion. “This is pure contempt, 100% contempt,” Justice Arun Mishra told company lawyers on the two companies not paying their AGR dues despite repeated court directions.
Post the court’s rather vividly delivered directions, both Vodafone Idea and Bharti Airtel have said that they would clear dues. “The Company is currently assessing the amount that it will be able to pay to DoT towards the dues calculated based on AGR (Adjusted Gross Revenue), as interpreted by the Hon’ble Supreme Court in its order dated 24 October 2019. The Company proposes to pay the amount so assessed in the next few days,” said Vodafone in a statement. Airtel too has confirmed to pay INR 10,000 crore (~$1.3 Billion) with the rest of dues to be paid “well before” March 17th, when the Supreme court hears the case again. The announcement has helped Airtel’s stocks, that have risen by 4.69% on Friday.
Vodafone Idea however, has made it clear that it will be difficult for the company to continue as a “going concern”. The statement read, “As disclosed in the Company’s financial statements for quarter ending December 31, 2019, the Company’s ability to continue as a going concern is essentially dependent on a positive outcome of the application for modification of the Supplementary Order,”
The previous ruling required the companies to pay this fine by 23rd January, a decision that the DoT(Department of Telecom) urged the Supreme court to hold steady on. But now, the court wants immediate payment of dues, threatening contempt of court proceedings against the companies and its directors, if the companies fail to comply.
In a historic ruling by the Supreme court of India, the apex court of the country ordered Airtel, Vodafone Idea, and many other telecom operators to pay fines that total up to a staggering $13 billion in spectrum usage charges and license fees. The ruling has already caused a slew of small telecom companies to drive out of business and seems like the Indian subsidiary of UK telecom giant Vodafone, might be next.
The announcement caused Vodafone Idea’s shares to drop by 23.21% on Friday. The U.K. based company is already under a combined debt of $14 billion and owes the Indian government around $4 billion. Vodafone Idea has already had a rather struggling run in the country. The company most recently reported a revenue of $1.5 billion, a 3.8% drop from last year. Losses swelled up to $687 million. Compared to Vodafone, Airtel reported a higher revenue of $2.93 billion.
By the looks if it, India’s telecom space could be a bipolar one, with Jio and Airtel being the only two remaining private players. And looking at the financial might of Reliance Industries, the parent behind Jio, Airtel won’t have a rosy run by any means. Vodafone’s journey in India might be coming to an end. The company, like many others, jumped into the Indian market for the numbers, amid a rising population of active Internet users. However, tides of time changed when Mukesh Ambani announced Reliance Jio, snatching away millions of customers from its competitors with free Internet and calling for extended periods of time.