India’s telecoms sector and leading players Bharti Airtel and Vodafone Idea will face an “unprecedented crisis” if the government refuses to relax its demand for $13 billion in outstanding dues, a lobby group says.
Airtel and Vodafone Idea have been spooked by the Indian Supreme Court’s decision last week to uphold a government demand that will force the companies to pay the bulk of Rs. 92,000 crores (roughly $13 billion) in overdue levies and interest.
The Cellular Operators Association of India (COAI) lobby group has joined the fray, seeking the intervention of India’s telecoms minister in a letter dated October 29, arguing that such payments will lead to a crisis at the companies and cause distress for the sector as a whole.
“Investments could be curtailed, services could deteriorate, jobs could be lost and investor confidence will most definitely be shattered,” COAI Director General Rajan S. Mathews said in the letter seen by Reuters.
“The impact of this crisis could exacerbate the stress in the industry and potentially be catastrophic for the nation.”
The government’s telecoms department did not respond to a request for comment.
A person with direct knowledge of the matter said Bharti and Vodafone both backed COAI’s views in the letter. But Reliance Industries-owned rival Jio, a COAI member, said the lobby group’s letter does not represent industry views.
Reliance “completely disagrees with the intent, tone, contents and connotations of the COAI letter”, it said in a letter to COAI, which it released to the media.
Jio began operations in late 2016 and is least affected by the Supreme Court ruling because it has only $2 million in charges to clear.
The COAI letter also said that the $13 billion demand could also place in jeopardy the Rs. 60000 crores ($8.5 billion) of annual payments Bharti and Vodafone Idea make to the government and threaten their ability to service existing debt.
“Such an adverse outcome will trigger a chain of events which will result in disruption to the entire business chain,” the letter said, with the COAI seeking a two-year moratorium on payments for airwave spectrum from 2020 to 2022.
India’s crowded telecoms sector once had more than a dozen mobile operators but consolidation has resulted in only three private players – Bharti, Vodafone and Jio – and two other debt-ridden state companies.
A government source said on Monday that a panel of bureaucrats had been formed to suggest ways to alleviate financial pressures on the sector.
© Thomson Reuters 2019