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Sunday, September 26, 2021

KM Birla asks govt to take his stake in Vodafone Idea if it can save telco

Overall, Birla owns more than 27 per cent stake in Vi, while its partner and global firm Vodafone Plc holds over 44 per cent.

Written by Aashish Aryan | New Delhi |
Updated: August 3, 2021 8:48:14 am
Kumar Mangalam Birla (Express photo by Nirmal Harindran)

Kumar Mangalam Birla, chairman of the telecommunications company Vi, has written to the central government that he is “more than willing to hand over” his stake in the company to any public sector, government, or domestic financial entity or to any other firm that the government may think fit, in order to keep Vi (formerly known as Vodafone Idea) going.

In a letter addressed to Cabinet Secretary Rajiv Gauba, Birla has said that the company was trying to raise Rs 25,000 crore from various investors, but most of them had asked to be assured that the Indian government wanted to “have a three-player telecom market”.

The Indian Express has seen a copy of the letter, which was written on June 7.

“To actively participate in this fundraising, the potential foreign investors (mostly non-Chinese and we are yet to approach any Chinese investors) want to see clear government intent to have a three-player telecom market (consistent with its public stance) through positive actions on long-standing requests such as clarity on AGR (adjusted gross revenue) liability, adequate moratorium on spectrum payments, and most importantly, a floor pricing regime above the cost of service,” Birla wrote in the letter.

Without this “immediate active support” from the government on the issue of AGR, moratorium on spectrum payments and floor pricing, Birla said the telco’s operations would be driven to an “irretrievable point of collapse”, given its financial situation. Birla had sought the government’s support on these three issues no later than July.

Birla owns more than 27 per cent stake in Vi; the partner and global firm Vodafone Plc holds over 44 per cent. Vi did not respond to emails asking whether it had received a reply to Birla’s letter from the Cabinet Secretariat or the Telecom Ministry.

Explained

Duopoly unwanted outcome

A duopoly in the telecom sector is likely to be an unpalatable outcome for the DoT and the sector regulators. If there is no immediate support that can help Vi get back on its feet, customers at the bottom of the pyramid will end up paying Rs 150-200 per month just for basic services — which would hurt the goals of Digital India, experts said.

The company has to pay a total AGR of more than Rs 60,000 crore over 10 years, or nearly Rs 1,500 crore every quarter between 2021 and 2031.

In addition, the company owed Rs 96,270 crore as deferred spectrum obligations, and another Rs 23,000 crore to banks and financial institutions as of March 31 this year.

Vi has unsuccessfully petitioned the Supreme Court multiple times, first challenging the AGR calculations done by DoT, and after the court ruled against it, seeking recalculations of its dues.

Following the Supreme Court’s AGR judgment in September 2019, Birla had said during a media event that Vi would have to shut shop if the government did not provide relief on the liability it faces in past statutory dues.

“It does not make sense to put good money after bad. That would be the end of the story for us. We will shut shop. If we are not getting anything then I think it is end of the story for Vodafone Idea,” Birla had said.

Vi and Sunil Bharti Mittal-led Bharti Airtel remain the only two private players to have survived the low tariff onslaught brought by Reliance Industries Limited (RIL)’s Reliance Jio Infocomm.

Over the last 29 years that private companies have existed in the Indian telecom market, the number of active players in the business-to-consumer segment has come down from more than a dozen to just three.

All the others were knocked out one by one —first after the Supreme Court’s order cancelling 122 telecom licences in the now infamous 2G scam case, and later with the low tariff regime.

With the looming threat of a Jio-Airtel duopoly in the Indian telecom sector, there have been calls for the government to intervene in some way. No relief package has, however, been announced.

DoT officials on Monday said it did not make much “financial sense” for the government to take over a private telecom company at a time when it was “already struggling” to offload its stake in public sector companies around the country.

“Even if a relief package is announced, it cannot be company-specific and has to be something which can benefit the entire industry as well as be in the favour of consumers,” a senior DoT official said.

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