LONDON/NEW DELHI: Vodafone-Idea, India’s second-largest telecom company, may be headed for liquidation unless the government eases off on demands for mobile spectrum fees, Nick Read, the chief executive officer of Vodafone, said in London on Tuesday.
At a press round-table, Read said the company’s future in India could be in doubt unless the government stopped hitting operators with higher taxes and charges, after the Supreme Court asked operators to pay over Rs 92,000 crore in past dues.
Read said India, where Vodafone formed a joint venture with Aditya Birla group’s Idea Cellular in 2018, had been “a very challenging situation for a long time”, but Vodafone Idea still had 30 crore customers or about 30% marketshare.
“Financially, there’s been a heavy burden through unsupportive regulation, excessive taxes and on top of that we got the negative Supreme Court decision,” he said.
Vodafone has asked the government for a relief package comprising a two-year moratorium on spectrum payments, lower licence fees and taxes and the waiving of interest and penalties in the Supreme Court case, which centred on regulatory fees. It is also calling for the spectrum payments to be spread over 10 years. Asked if it made sense for Vodafone to remain in India without such a relief package, Read said: “It’s fair to say it’s a very critical situation.”
However, Vodafone India denied reports attributed to British media that Read had communicated to the Indian government that “either they should take their boots off the neck of the industry and allow it to better compete… or Vodafone Idea is destined for a potentially chaotic final act with potential repercussions for India’s international standing”.
The arrival of new entrant Reliance Jio Infocomm in 2016 plunged the industry into a brutal price war. On Tuesday, Read said Vodafone was not committing any more equity to India and the country effectively contributed zero value to the company’s share price. As a result of the ruling, it has written down the value of its stake in the joint venture to zero.
The Vodafone CEO said that sustaining the India business remains challenging. “If you don’t get the remedies being suggested, the situation is critical… If you’re not a going concern, you’re moving into a liquidation scenario — can’t get any clearer than that.”
Read and Vodafone chairman Gerard Kleisterlee met Indian government officials in September and set out the relief proposals, arguing that Vodafone was the largest foreign direct investor in the country. A government committee is considering the request and Read said he expects to hear more in the coming weeks.