Another financial blow for India’s operators

Another financial blow for India’s operators

India’s Supreme Court has ordered the country’s operators to pay the government a total of $13 billion in outstanding airwaves and license fees. This follows a legal dispute going back some 20 years between the government and the operators.

The MNOs in India are now required to pay the regulator between three percent and five percent of their adjusted gross revenue in usage charges for frequencies, along with eight percent of adjusted gross revenue (AGR) as licence fees. Operators have argued that AGR should solely comprise revenue accrued from core services. The  Department of Telecommunications (DoT) has said that it should include all revenue. For now, it seems, the DoT has won the argument.

Most of the country’s operators have been penalised, but Vodafone Idea, asked to pay around $4 billion, and Bharti Airtel, with a $3 billion penalty, have been particularly hard hit. Reliance Jio’s outstanding payment is said to be a mere $1.8 million.

Indian press estimates suggest that Bharti Airtel and Vodafone Idea between them now have a net debt of almost $28 billion. Of course this figure does not take into account future spectrum auctions and rollout costs connected with 5G.

Additionally, Vodafone faces the prospect of a $2.2 billion tax bill linked to its 2007 acquisition of Hutchison Whampoa Ltd’s Indian operations.

An appeal from Vodafone Idea and Airtel is likely – or a request for deferred, or even waived, payment. For the moment this is an extremely unwelcome result for the cash-strapped Indian operators – and possibly Indian telecoms. A statement from Bharti Airtel suggests that the decision “may further weaken the viability of the sector as a whole”.

 

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