After years of speculation about the survival of Vodafone Idea, India’s third largest telecom firm, the government has finally stepped in to rescue the debt laden joint venture. On a day when Vodafone Idea users in Mumbai faced another snag in service, the state has offered to become the largest stake holder in the firm by converting dues worth Rs 16,000 crore to equities. This saves it from collapsing under a Rs 58,254 crore debt, which it was left after a 2019 Supreme Court Verdict in favour of the Department of Telecom, ordering telcos to pay AGR dues.
Annual Gross Revenue dues, include the licensing fee that telcos were supposed to pay to the government for spectrum usage for 16 years, along with penalties and interest on them accrued over the same period. This left all telecom service providers in India, with AGR dues worth more than Rs 1.3 lakh crore to be paid to the DoT, with Airtel and Vodafone Idea having to foot a bulk of the bill.
So how did it all come down to this?
2005: As the telecom revolution was taking shape, top telecom operators including Airtel, and Vodafone then known as Hutch, refused to pay AGR dues over a dispute about its definition, and approached the Telecom Disputes Settlement and Appellate tribunal.
2015: It took a decade for the tribunal to decide that AGR payments include all revenues except for capital receipts and non-telecom income such as rent, dividend and proceeds from sale of assets among other.
2019: The Supreme Court gives a vedict where it agrees with DoT’s definition of AGR, and ordered all telcos including Airtel, Vodafone, BSNL and MTNL, to pay the fee they owe for 14 years taken to resolve the case, along with the penalty and interest applicable for the same time.
While Airtel and Vodafone were left with a burden of more than Rs 90,000 crore, Reliance Jio, which was launched in 2016, only had to pay Rs 630 crore.
2020: Vodafone Idea was left to pay the highest amount of Rs 58,254 crore, of which it paid Rs 7,854 crore, with little over Rs 50,000 crore remaining as a balance amount. Along with Airtel, it got 10 years to pay back the dues in parts.
2021: Although Airtel paid installments of four out of 10 years in advance, Vodafone Idea decided to opt for a four year moratorium on payment.
2022: Vodafone Idea received an ultimatum from Indus Towers, which threatened to shut down its services if payments worth Rs 7,000 weren’t cleared, but later agreed to the telco’s plan to pay it all back in installments. Although Vodafone’s parent firm had earlier refused to fund the joint venture’s recovery, it eventually provided Rs 436 crore.
2023: Burdened by loans for paying back Indus Towers’ bills, Vodafone Idea had been unable to expand 4G services, couldn’t buy 5G equipment, and was losing subscribers to Airtel and Reliance Jio.
The interest payment on the AGR dues for Vodafone Idea alone amounts to a staggering Rs 16,000 crore, which the government has finally agreed to convert into a 35 per cent stake for it in the firm, so that Jio and Airtel don’t dominate under a duopoly among them.
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