India's third largest telecom service provider, Vodafone Idea Ltd IL), is struggling with a liquidity problem of such magnitude that it is inches away from bankruptcy. The fallout from such a collapse would be widespread, which will be felt by the company’s subscribers, employees, lenders, and the telecom sector as well. Without VIL, India’s telecom market, which once boasted of over a dozen operators, would be reduced to an effective duopoly.
But the biggest loser if VIL goes bust will be the government. Because not only will it have to deal with fixing a wounded sector and assuaging the battered confidence of foreign investors, it will also bear the brunt of the financial losses arising from such a collapse.
VIL’s slide into crisis
The genesis of VIL’s current troubles may be placed quite squarely on the outcome of the over 14-year-long adjusted gross revenue (AGR) case at the Supreme Court.
The matter revolved around the definition of aGR, based on which telcos pay their statutory dues to the government. The telcos argued that aGR should not include non-telecom revenue; the department of Telecommunications (doT) disagreed.
Eventually, in October 2019, the SC delivered a verdict favouring the government and directed telcos to pay up their pending aGR dues along with interest and penalties. According to the doT’s computations, this figure came out to a whopping ₹1.52 lakh crore, and the largest burdens fell on Vodafone Idea (₹58,000 crore) and Bharti airtel (₹43,000 crore). Reliance Jio, a late entrant, got away with a liability of just ₹191 crore.
after a series of appeals and petitions, telcos managed to get an extended 10-year payment schedule comprising annual instalments from the courts, but the sC has not budged on the amount that is due.
now, the aGR verdict left both airtel and VIL in financial trouble, but airtel’s liquidity position was not as strained as the latter’s and it managed to raise enough capital through 2020 to offset the dent its AGR obligations delivered.
Things haven’t been the same for VIL. While its board has approved raising ₹25,000 crore of capital, it has met with little success so far, and both its promoters-the Aditya Birla Group and British telecom giant Vodafone Plc-have ruled out additional capital infusions. In fact, Vodafone Plc disclosed in December 2019 that it has written down the value of VIL on its books to nil.
Continue reading your story on the app
Continue reading your story in the newspaper
Govt May Tweak IDBI Bank Bidding
Consortiums likely to be allowed to participate in the bidding so as to get better valuation
UP House: Rebel SP MLA bags deputy speaker post
WITH just five months left for the incumbent BJP government, the Uttar Pradesh Assembly elected a deputy speaker after a gap of 14 years, at a special single-day session on Monday. Rebel Samajwadi Party (SP) MLA Nitin Agarwal walked away with the honour.
VICTIM OF DEADLY TASMAC ROBBERY RECALLS CLOSE CALL
Stabbed and shot, the 43-year-old staff survives 6 days with a bullet lodged inside
Paddy on 2,000 acres damaged by rain
Though water has started receding, Kumari farmers claim the crops cannot be saved and they are unlikely to get insurance payout
Disbursement of Samba crop compensation worth ₹1,597 cr begins
CHIEF MINISTER MK Stalin kick-started the disbursement of crop insurance compensation, to the tune of ₹1,597.18 crore, to around six lakh farmers in the State for the loss of Samba crops during the year 2020-2021.
DESTRUCTION REIGNS IN SOUTH DISTRICTS
Heavy rains battered the southern parts of the State on Sunday, leaving deaths and destruction in their wake. Two youth drowned in separate waterbodies and search is on for a 79-year-old man who was washed away in a flash flood, in Kanniyakumari. The downpour also damaged five houses and brought to ground 12 electric poles across the district.
Lanka seeks $500 mn credit from India for fuel purchase
SRI LANKA has sought a $500 million credit line from India to pay for its crude oil purchases amid a severe foreign exchange crisis in the island nation.
SASIKALA SAYS PARTY SHOULD STAY UNITED
AS the AIADMK stepped into its golden jubilee year on Sunday, VK Sasikala, who was removed as the interim general secretary of the party four years ago, indicated that she has a strong political agenda for the coming years. Without hitting out at anyone in the AIADMK, Sasikala chanted the ‘unity mantra’ as she did when she decided to keep away from politics eight months ago.
Chhattisgarh industries want ‘first right' over coal
AMID reports of power plants facing coal shortage, Chhattisgarh-based industries, including those engaged in making aluminium and steel, have asserted that citizens living in the state have the “first right over its coal and power”.
9 children among 25 killed in Kerala rains
Army, NDRF and Defense Security Corps teams deployed for rescue and relief
Came Through Drippin
Most of the world relies on flood irrigation to water crops. A more efficient alternative hasn’t been widely adopted because it’s so expensive. One Israeli soil physicist has the answer: a tiny plastic widget
The Group Portrait: The U.S. Open's Tenure Track
At court with the most senior ball-lobbers and towel-profferers in tennis.
Study Gives Strawberry Growers Hope in Pest Battle
What we’re raving about this month
A Climate To Fear
Central America’s subsistence farmers are fleeing increasingly severe droughts and storms
THE FUTURE OF FOOD LOGISTICS
HOW THE FOOD SUPPLY CHAIN IS CHANGING IN THE WAKE OF COVID-19
The Baltimore County Center for Maryland Agriculture is a largely unknown oasis on the edge of the city.
Florida-Grown Coffee? How UF Scientists Are Using AI To Serve Up the Possibilities
MOST OF THE WORLD’S COFFEE is grown in tropical regions. However, a changing climate could allow coffee to grow farther north — for example, in Florida. In April, all HCYCP participants pick up their tree kits to start their project.
LAWSUIT SAYS FOXCONN COST GOVERNMENTS HUNDREDS OF MILLIONS
Worldwide electronics leader Foxconn Technology Group violated terms of its contract in Wisconsin, while local governments spend hundreds of millions of dollars to prepare for the project, a lawsuit filed by a real estate development company alleges.
GEORGIUS AGRICOLA'S: DE RE METALLICA
465 Years Old and Still Relevant