The telecoms debt crisis in India has now become headline news across many of the world’s business papers as one of the partners in the Vodafone Idea joint venture has suggested that the company could ‘shut up shop’.
Vodafone Idea, like rival Bharti Airtel, was badly hit financially when India’s Supreme Court ruled in October that the company had three months to pay a number of outstanding fines. As the sum in question is, for Vodafone Idea, about $4bn, this is not a trivial charge. The operator’s net quarterly loss of a little over $7bn, announced soon after the ruling, is said to be among the largest in Indian corporate history.
Not surprisingly, Vodafone Idea wants the government to step in, a sentiment echoed, as reported here, by the Federation of Indian Chambers of Commerce & Industry (FICCI) and the operators’ association COAI, among others.
It should be emphasised that the person widely quoted as suggesting the company may have to close is Kumar Mangalam Birla, chairman of joint venture partner the Aditya Birla Group, rather than a spokesperson from the parent group of the Vodafone part of the alliance. That said, Nick Read, Vodafone’s group chief executive, has already been quoted as saying that the joint venture could be facing liquidation.
Price wars that have driven down data earnings haven’t helped, although all three companies have recently raised prices. Nevertheless, according to UK business newspaper the Financial Times, some of Jio’s new rates still undercut those of its competitors.
The government has agreed to defer spectrum payments for two years but has not indicated any plans to waive the fines imposed by the Supreme Court.
Meanwhile, getting closer by the day are India’s 5G spectrum auctions, which surely require a measure of financial stability on the part of would-be bidders to have any chance of success.
