about 5 months ago
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“Is Vodafone going to shut down?”

This is the biggest question doing the rounds today. The net loss of over Rs.6400 crore for Q3FY20 did not cause much stress but the news that the Supreme Court (SC) has initiated contempt cases against the telecom companies, summoning their directors to face the contempt is what has got everyone truly roiled up. SC also asked telecom companies, DoT to ‘show cause’ as to why contempt proceedings should not be launched against them.

More importantly, the SC point blank refused any relief to the companies; in fact it has asked the companies to pay up before 17th of March, the date on which the directors have been summoned to the court.

Last month, chairman Kumar Mangalam Birla had said very explicitly that the company will shut down if the Govt does not provide relief on the liability it faces in past statutory dues. Vodafone’s total tab payable to the Govt is Rs 53,038 crore of which Rs 24,729 crore is of spectrum dues and Rs 28,309 crore in licence fee.

On 5 February, Vodafone said it had sought waiver of interest and penalty from statutory dues demand raised by the government from Vodafone Idea and a time of 10 years to pay only the principal amount with a two-year moratorium.

This is indeed a very sad state of affairs. Calling it unfair that telecom companies have to pay license for revenue which does not even arise out telecom business has no relevance today post this judgement. What is shocking is that the Govt which has always been talking about economic progress and development remains a mute spectator and probably to meet its own revenue targets has turned a blind eye.

Why is it that the Govt is not spelling out any alternatives; instead of putting the entire survival of the industry in crisis, allowing only one player, Jio to attain a monopolistic status, why couldn’t the Govt not insist on companies paying up only the principal amount?

It would have been more apt on the part of the Govt to have negotiated the final payment. The Govt does not bat an eyelid when it comes to taking haircuts for bailing out PSU banks in the insolvency courts- it is pretty routine where 40 t0 60% of the principal amount is foregone in the resolution process.

Also if a moratorium is allowed in payment of spectrum, why not on this AGR dues?

The Govt can overrule the SC decision of today and work out a more amicable scenario. Vodafone shutting down will spell bad news for the entire sector and banking industry.

Our Editor, Mr.SP Tulsian is of the view that he has serious doubts over the existence of Vodafone but he does not see banks getting into any crisis as he does not foresee Birla defaulting. Mr.Tulsian says that existence of Vodafone under the same promoters is highly doubtful.

Lets see where this very serious situation heads. Will the Govt get reasonable or will Airtel become the biggest gainer? Looks like we will indeed be left with two players only – Jio and Airtel; BSNL and MTNL themselves are on their death bed.

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