India’s Top Court Gives Telecom Firms 10 Years To Pay Government Dues
New Delhi: India’s top court on Tuesday gave mobile carriers 10 years to pay back dues owed to the federal government, offering some respite for heavily indebted Vodafone Idea Ltd whose business has been hit by cut-throat competition in recent years.
Vodafone Idea and Bharti Airtel (BRTI.NS), two of India’s three major carriers, had previously asked the court for 15 years to settle their fees.
Tuesday’s Supreme Court ruling means companies will have until 2031 to clear their dues, after they missed an original January deadline ordering them to pay roughly $13 billion.
The dues refer to the amount that telecom providers have to pay to the Department of Telecommunications (DoT) for using airwaves and in license fees.
The decision will come as a relief to Vodafone Idea, a joint venture between Britain’s Vodafone Group Plc (VOD.L) and India’s Idea Cellular, which reported its eight consecutive quarterly loss in the three months to June and expressed concerns about its ability to stay afloat.
The company’s gross debt, excluding its lease liabilities, was 1.19 trillion rupees ($16.31 billion) as of end-June.
The entry in India of Reliance Industries’ Jio Info COMM telecoms venture in late 2016 with free voice services and cut-price data, forced many rivals out of the fiercely competitive market. Others such as Vodafone and Idea were forced to regroup but continue to bleed and lose subscribers.
Vodafone Idea has paid 78.54 billion Indian rupees, according to regulatory filings, and still owes roughly 500 billion to the government.
On Tuesday, the Supreme Court also asked telecoms firms to pay 10% of the dues owed by March 31, 2021, pushing Vodafone Idea’s stock down 9.8% at 0850 GMT.
“The window for Vodafone to raise funds, have better models and give paybacks commitment is small which is adding pressure on the stock,” said Abhimanyu Sofat, Head of Research, at brokerage IIFL Securities.
Vodafone Idea did not immediately respond to a request for comment.
Bharti Airtel previously said it has paid its complete dues of 180 billion rupees on the basis of self-assessment, but government calculations suggest it still needs to pay another 259.76 billion rupees. Its shares were up 6.9%.
India’s newest carrier Jio, controlled by India’s richest man Mukesh Ambani, has already cleared its smaller backlog of charges.
