Ministry of Communications, Government of India today said that it was not aware of any speculations or reports about telecom operator Vodafone Idea shutting down its operations.
This was stated by junior telecom minister Sanjay Dhotre when Member of Parliament Pratima Mondal sought government of India’s reaction to reports about the company being forced to shut down because of a Supreme Court judgment.
“No such information is available with the Government,” said Dhotre in a written reply to the question seeking government’s reaction to reports about the rumored shutting down of the operator.
The telecom operator has in recent months repeatedly said that it will be forced to shut down if government continues to demand more than Rs 53,000 cr from it under a new definition of ‘revenue’.
In October, a Supreme Court bench headed by Justice Arun Mishra asked companies such as Vodafone Idea, Bharti Airtel and others to pay nearly Rs 1 lakh cr by ruling that any company that has a telecom license must pay a part of all its revenue — whether from telecom or not — to the Department of Telecom.
Companies had earlier not been paying a share of their revenue from unrelated activities — such as retailing, media, oil and gas and so on — to the Department of Telecom, pointing out that these businesses are not conducted under license from DoT and are therefore not covered by the telecom license.
However, the Supreme Court bench disagreed with this, and said the companies’ telecom license requires them to pay to DoT a share of all their revenues, even if the revenues had nothing to do with the telecom license.
The bench headed by Justice Arun Mishra later came down hard on the DoT for giving time to companies to pay back the humongous amounts, and threatened to take action against DoT and company officials.
The biggest liability of the ruling has fallen on pipeline operator GAIL India Ltd, which has been slapped with a demand for around Rs 1.7 lakh cr, followed by Vodafone Idea, which faces a demand for Rs 53,000 cr, and Bharti Airtel, which has been asked to pay around Rs 38,000 cr.
Vodafone Idea, which had estimated cash reserves of only around Rs 10,000 cr, has already paid around Rs 3,500 cr.
It has repeatedly said that it has no money to pay the amounts demanded by the government, and will cease to be a ‘going concern’ if legal action is taken to secure the payment, implying that it will go bankrupt and shut down.
It repeated this stand as recently as in its quarterly investor update last month.
“..material uncertainty exists that cast significant doubt on the company’s ability to continue as a going concern and its ability to generate the cash flow that it needs to settle, or refinance its liabilities including those relating to the SC AGR Judgement and guarantees as they fall due,” Vodafone Idea said last month.
The company has also repeatedly asked the government to make some arrangement so that it does not have to shut down.
A shutdown of Vodafone Idea could push tens of thousands of people out of their jobs and cause further pain for lakhs of business partners — such as retailers, suppliers, tower companies, landlords who have leased their land for towers and so on. It will also cause massive inconvenience to customers.
Despite such requests from the company, the government has not come up with any suggestions about how to prevent a shut down.
OIL COMPANIES REFUSE TO PAY
Besides Vodafone Idea and Bharti Airtel, the ruling has also impacted the viability of several other companies such as pipeline operator GAIL India Ltd, oil producer Oil India Ltd and Delhi Metro Rail Corporation.
Like Vodafone Idea and Airtel, these companies too have been paying to DoT only a share of their telecom revenue, and not their total revenue.
However, after the Supreme Court ruling, these companies now have to pay a share of their revenue from oil and gas, metro rail operations, pipeline business and so on to the Department of Telecom.
The total liability faced by these companies is estimated at around Rs 2.5 lakh cr.
In case of GAIL, for example, the total demand is nearly three times the value of the company itself. In other words, even if GAIL were to be sold entirely, it would still be only able to raise about one third of the amount demanded by DoT.
Dhotre said these companies have approached the DoT and said they do not intend to make the payments demanded from them.
“Public Sector Undertakings (PSUs) such as GAIL, Oil India etc. represented to Department of Telecom that the AGR judgment is not applicable on them and therefore they do not owe any dues to the Department of Telecom,” he said.
He also said that these companies have been told by the Supreme Court “to seek relief from appropriate forum”.