Saturday, 29 February 2020

Vodafone Idea shares crash after receiving no respite from Supreme Court over AGR debts

by Harry Baldock, Total Telecom
Friday 17 January 20

Yesterday’s court ruling could be the company’s death knell, with experts questioning how the telco can survive

The Supreme Court is not giving an inch when it comes to the exorbitant adjusted gross revenue (AGR) penalties being demanded from India’s operators. Yesterday, the Supreme Court denied all requests for relief by the beleaguered telcos.    The news was met by a collapse of Vodafone Idea&rsquo…

The Supreme Court is not giving an inch when it comes to the exorbitant adjusted gross revenue (AGR) penalties being demanded from India’s operators.

Yesterday, the Supreme Court denied all requests for relief by the beleaguered telcos. 
 
The news was met by a collapse of Vodafone Idea’s share prices, which fell almost 40%. 
 
With no clear solution to paying the outstanding dues, Vodafone Idea is perceived to be in dire straits.
 
“Experience in India suggests it is unwise to talk of uncertainties, but it is very hard to see how Vodafone Idea survives,” said analysts at New Street Research LLP.
 
Vodafone Idea's Chairman Kumar Mangalam Birla has already warned that the company may have to cease operations if no relief can be found.
 
Bharti Airtel, which has recently taken drastic action to raise the $3 billion it owes the government, could be weathering the storm. Their share prices initially rose around 6% yesterday, likely off the back of Idea’s seemingly inevitable collapse, before slipping by 13% today. 
 
If Vodafone Idea does cease operations, it could spell disaster for the Indian telecoms industry. Smaller ISPs will see themselves crushed between the two remaining giants.
 
“It is going to be a disaster for the telecom industry,” said Rajesh Chharia, President of the Internet Service Providers Association of India. “Dismissal of review petition will lead to a duopoly situation which is not good for consumers. Small ISPs will not be able to survive unless government steps in to review AGR definition."
 
Both Bharti Airtel and Vodafone Idea have expressed interest in renewed attempts to twist the government’s arm via additional petitions, but, having been told no twice already, the writing could be on the wall.
 
 
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