Vodafone likely to shut down India operations: Experts concerned, key developments so far

In the highest-ever quarterly loss by any corporate in India, Vodafone Idea has posted a loss of Rs 50,921 crore amid concerns on its survival. On Tuesday, Vodafone CEO Nick Read hinted that the mounting debt on Vodafone Idea could result in the company's untimely exit from India market. Raising doubts about Vodafone's future in India without AGR relief, the telecom company chief, in a way, issued an ultimatum to the government. Read said the government needs to ease off on payment demands to ensure a future for Vodafone-Idea Ltd.

"Financially there's been a heavy burden through unsupportive regulation, excessive taxes and on top of that we got the negative Supreme Court decision," Read told reports on Tuesday.

The Supreme Court of India upheld the government's position on including revenue from non-telecommunication businesses in calculating the annual Adjusted Gross Revenue (AGR) of telecom companies, a share of which has to be paid as licence and spectrum fee to the exchequer.

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Vodafone Idea said its ability to continue is dependent on obtaining relief from the government and positive outcome of the proposed legal remedy. The company is also in the process of filing a review petition against the Supreme Court order. The joint-venture estimated liability of Rs 44,150 crore post the apex court order and made a provision of Rs 25,680 crore in Q2 2019.

Could be a warning sign for the telecom sector: Experts

Meanwhile, the government is not happy over business uncertainty remark made by Vodafone Group in India citing the Supreme Court judgement that puts around Rs 1.33 lakh crore liability on telecom players that are operational at present. Although Vodafone has reportedly promised to remain invested in India, the uncertainty of its future could be a warning sign for the telecom sector, according to experts.

"Telecom sector is extremely stressed, paying the price of several years of policy and regulatory missteps, in a critical state and urgently needs relief – revenues have sharply dipped while consumption has skyrocketed," said a public-policy researcher Kazim Rizvi, the founder of an emerging policy think-tank The Dialogue.

"Over the last several years, inconsistencies in policy and regulation have created havoc. It has already seen several large India and International players quit or shut shop. The telecom sector has been saddled with mounting debt despite consistent equity infusion from promoters. High input costs have burdened the sector," Rizvi added.

(With agency inputs)