The Supreme Court on Tuesday gave mobile carriers 10 years to pay dues to the government, offering some relief to heavily indebted Vodafone Idea, whose business has been hit by cut-off competition in recent years.
Vodafone Idea and Bharti Airtel, two of India’s three major carriers, had earlier sought 15 years from the court to settle their fees.
Tuesday’s Supreme Court ruling means companies will have until 2031 to clear their dues, when they missed the original January deadline, paying them nearly $13 billion (about Rs 94,878 crore). was ordered to do.
Dues refers to the amount that telecom providers have to pay to the Department of Telecommunications (DoT) for using the airwaves and for license fee.
The decision will come as a relief to Vodafone Idea, a joint venture between UK’s Vodafone and India’s Idea, which reported eight consecutive quarterly losses in three months in June and expressed concerns about its capacity.
The gross debt of the company, excluding its lease liabilities, stood at Rs. 119,000 crore by the end of June.
The entry of Reliance’s Jio telecom venture into India in late 2016, along with free voice services and cut-price data, knocked many competitors out of the fiercely competitive market. Others, such as Vodafone and Idea, were forced to regroup, but were bleeding out and lost customers.
Vodafone Idea Rs. 7,854 crore, as per regulatory filings, and still stands at around Rs. 50,000 crore to the government.
On Tuesday, the Supreme Court asked telecom firms to pay 10 per cent of the dues by March 31, 2021, leaving Vodafone Idea stock down 9.8 per cent at 08:50 GMT.
Abhimanyu Sofat, head of research, brokerage IIFL Securities, said, “Vodafone has a small commitment to raise funds, have a better model and payback, which is adding to the pressure on the stock.”
Vodafone Idea did not immediately respond to a request for comment.
Bharti Airtel had earlier said that it has paid full dues of Rs. 18,000 crore based on self-assessment, but government calculations show that it still needs to pay another Rs. 25,796 crores. Its shares were up 6.9 per cent.
India’s newest carrier Jio, controlled by India’s richest man Mukesh Ambani, has already paid its petty charges.
Telecom providers in India have to pay around three to five per cent of their adjusted gross revenue (AGR) to the Department of Telecommunications as usage charges for airwaves and eight per cent of the AGR as license fee. They have long disputed the definition of AGR but last year the Supreme Court upheld the DoT’s view that AGR should include all revenues.
© Thomson Reuters 2020
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