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Telecommunication

India considers relief for ailing telecom operators

Vodafone Idea, Bharti Airtel face March 17 deadline for clearing dues

India's debt-laden telecom industry has been seeking a relief package from the government as operators face an impending March 17 deadline to pay billions of dollars in penalties and levies following a Supreme Court order last month.   © Reuters

MUMBAI (NewsRise) -- India is considering offering relief to the beleaguered telecom industry by allowing companies to stagger payments on their outstanding levies and penalties, even as Vodafone Idea, the nation's biggest wireless carrier, totters on the brink of bankruptcy.

The telecommunications department has readied a proposal to allow operators to stagger over five-to-10 years the payments of their adjusted gross revenue dues, a senior government official told NewsRise on Wednesday. The department is awaiting inputs from the attorney general on the prospects of seeking cabinet approval for the proposal before Mar. 17.

India's debt-laden telecom industry has been seeking a relief package from the government as operators face an impending March 17 deadline to pay billions of dollars in penalties and levies following a Supreme Court order last month. In February, the apex court had refused to give any reprieve to Bharti Airtel, Vodafone Idea, and other telecom companies who had sought an extension to pay the overdue amount to the telecom department.

The court also sought an explanation from the government for not insisting on making the payments before the initial Jan. 23 deadline. The Supreme Court had, in October, upheld the telecom department's demand that operators pay $13 billion in levies and penalties on or before Jan. 23.

"The question is whether we should go to the cabinet before Mar. 17 or after that," said the official, who declined to be identified, said. "We have asked for attorney general's view on this. If the attorney general approves, we will send the note to the cabinet this week."

The court's order dealt a blow to Vodafone Idea, which may have to pay as much as 442 billion rupees ($6 billion) in adjusted gross revenue dues and penalties, the biggest in the industry. Rival Bharti Airtel will have to fork out 343 billion rupees, as per the government's assessment, said analysts.

Vodafone Idea said Friday that its self-assessment of adjusted gross revenue shows a total of only 215.33 billion rupees, of which the principal amounts to 68.54 billion rupees. Vodafone has so far paid 35 billion rupees to the government.

Last week, Nick Read, the chief executive of U.K.'s Vodafone met government officials and said the company wants to make a "new good" beginning in India. Vodafone's India operations merged with smaller rival Idea Cellular in 2018 after a price war triggered by the entry of billionaire Mukesh Ambani-backed Reliance Jio Infocomm wreaked havoc on the sector.

The cut-rate price competition eroded the profits and revenue of operators such as Bharti Airtel and Vodafone, while several smaller operators were forced to exit.

Vodafone's Read has requested the government to give some assistance to keep the India venture afloat, BloombergQuint reported, citing sources it did not identify. The government is against a monopoly in the telecom sector, and wants Vodafone Idea to survive and remain invested in India, the report quoted Telecom Minister Ravi Shankar Prasad as saying.

Vodafone Idea is now barely managing to stay afloat with limited operating cash, and is laden with a debt of 1.03 trillion rupees.

Shares of Bharti Airtel closed down 0.5% while that of Vodafone Idea gained 8.5% in Mumbai trading. The benchmark S&P BSE Sensex added 0.2%.

--Dhanya Ann Thoppil

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