Vodafone Idea says it can’t pay

Vodafone Idea says it can’t pay

Indian operator Vodafone Idea has written to the Department of Telecommunications (DoT) saying it won’t be able to pay the adjusted gross revenue (AGR) dues it owes unless the government takes urgent measures.

News reports from India say that Vodafone Idea has suggested allowing staggered payment, a reduction in licence fees and spectrum usage charges, and the implementation of a floor price in tariffs. The AGR debt is (at present exchange rates) around $7.4 billion; Vodafone Idea has so far paid seven percent of its liabilities.

As a reminder of its importance to the market, the company apparently also mentioned a subscriber base of 300 million and an employee base of 10,000.

The company has more than once said that it may go under if it is forced to make the full payment of AGR dues requested. Its letter has been backed up by a similar communication from the Cellular Operators’ Association of India (COAI), which also suggests an immediate floor price for tariffs as well as a three-year moratorium followed by a 15-year payment schedule for AGR dues.

A knock-on effect of this ongoing crisis is that telecom tower infrastructure provider Bharti Infratel is said to be hesitant about going ahead with a plan involving a merger with Indus Towers and a buyout of the seven per cent equity stake from Vodafone Idea in the resultant entity. The reason is uncertainty over the survival of Vodafone Idea although, ironically, the sale would give a useful cash bonus to Vodafone Idea and potentially pay some of its AGR debt.

Infratel, like quite a lot of other players in this drama, is awaiting the outcome of the next hearing in the Supreme Court on the AGR issue, when the court will hear modification pleas asking for permission to negotiate more time to pay. However, the court date is 17 March, by which time some or all of the dues owed will have to be paid in any case.

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