Tuesday, 21 January 2020

Vodafone Idea chairman confirms company will fold, unless it receives government assistance

By Chris Kelly, Total Telecom
Friday 06 December 19

Vodafone Idea's share price has fallen steadily since the Department of Telecoms announced that Indian telcos must start making payment of their outstanding dues within three months

Vodafone Idea's chairman, Kumar Mangalam Birla, has confirmed that the company will cease to exist unless it receives assistance from the Indian government in paying around $7.4 billion in outstanding dues and penalty charges. "If we are not getting anything then I think it is the end of the story for Vodafone Idea…

Vodafone Idea's chairman, Kumar Mangalam Birla, has confirmed that the company will cease to exist unless it receives assistance from the Indian government in paying around $7.4 billion in outstanding dues and penalty charges.

"If we are not getting anything then I think it is the end of the story for Vodafone Idea," Birla said at a leadership summit in India.

Vodafone Idea owes 53,038 crore rupees ($7.426 billion) to the Indian government, following a landmark ruling by the Supreme Court over the way Indian telcos calculate their Adjusted Growth Revenues. Both Vodafone Idea and Bharti Airtel have been severely impacted by the ruling, with the two telcos being liable for the vast majority of the $13 billion total dues. Last week, Bharti Airtel announced plans to raise an additional $3 billion in finance to help cover it's portion of the dues. However, Vodafone Idea's chairman said that his company would not be taking similar measures.  

"It does not make sense to put good money after bad. That would be end of story for us. We will shut up shop [if a government relief package is not agreed]," he added.

Birla's comments echo those of Vodafone Group's CEO, Nick Read, who told Total Telecom that the situation in India was "critical".

Speaking at a Vodafone event in London last month, Read said that the Indian government needed to deliver a significant relief package in order to demonstrate its commitment to a "vibrant and competitive" telecoms market.

"To be very clear: if you don't get the remedies that you are looking for and the situation is critical in terms of [existing as] a going concern. What you need to think about is that this is a joint venture in India and the remedy package is critical for the sustainability of the business going forward. We are not going to put more equity into it from the Group. Our view is: India its time for you to decide whether you really do want a vibrant and competitive market place," he said. 

"If you are not a going-concern, then you are moving into a liquidation type scenario. You can't get any clearer than that. I think the government fully understands that," he concluded.  

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