NOT JUST LENDERS, USERS & STAFF; VIL COLLAPSE WILL HIT GOVT THE HARDEST
The New Indian Express Chennai|August 08, 2021
Liabilities include deferred spectrum obligations of ₹96,270 cr and ₹60,960 cr AGR dues
Jonathan Ananda

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.

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