Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

India Orders Wireless Carriers to Pay $13 Billion in Dues

Stock Markets Oct 24, 2019 04:41AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. India Orders Wireless Carriers to Pay $13 Billion in Dues

(Bloomberg) -- India’s top court ordered eight telecom carriers, including Bharti Airtel Ltd. (NS:BRTI). and Vodafone (LON:VOD) Idea Ltd (NS:VODA)., to pay the government as much as 920 billion rupees ($13 billion) in past dues, dealing a blow to the businesses already struggling to make profits and pare debt.

The Supreme Court, in a ruling read out by a two-judge bench headed by Justice Arun Mishra, said it will decide on the timeline for payments. Thursday’s decision possibly puts an end to the two-decades-old legal dispute over airwaves fees owed to the government.

The operators have disputed for years over how authorities calculate their annual adjusted gross revenue, a share of which is paid as license and spectrum fees. With the ruling, the court upheld the government’s method, while rejecting the companies’ plea to exclude revenue from non-telecommunications businesses.

The court order is the latest shock to an industry that has piled on billions of dollars in debt to roll out 3G and 4G networks in the past decade, even as intense competition for users led to a brutal tariff war, weighing on earnings. Bharti, controlled by tycoon Sunil Mittal, and billionaire Kumar Mangalam Birla’s venture with Vodafone (LON:VOD) have a combined net debt of almost $28 billion.

The worst hit are the operators who have been in the business for more than 10 years, while it is far less consequential for Mukesh Ambani’s Reliance Jio Infocomm Ltd., which entered in 2016 and owes the least among all -- 130 million rupees.

Shares of Vodafone (LON:VOD) Idea plunged as much as 23% to a record low, while Airtel tumbled as much as 9.7%, the biggest intraday loss since October 2012. Reliance Industries Ltd (NS:RELI), the parent of Jio, rose 1.5%.

Stay Afloat

Since Jio disrupted the market with free calls and cheap data, the incumbents have struggled to stay afloat. Two have entered insolvency in the past two years, while some have merged to combine forces, like Vodafone’s local unit with Idea Cellular Ltd.

For the government that runs perennial budget deficits, the court ruling comes as a fiscal bonanza. On Wednesday, Telecommunications Minister Ravi Shankar Prasad revealed a $6 billion spending plan to revive two money-losing state-run carriers.

The government had raised a total demands of around 920 billion rupees against all telecom operators, including defunct ones, according to filings in the court.

In the past two years, two of India’s biggest telecom operators -- Malaysian tycoon T. Ananda Krishnan’s Aircel Ltd., and Anil Ambani’s Reliance Communications Ltd. -- went into bankruptcy. The huge demands can also disrupt their resolution process scaring away potential buyers.

High capital spending, dividends and spectrum costs have resulted in neutral or negative free cash flow for telecom companies in South and Southeast Asian countries including India, according to a Moody’s Investors Service note on Oct. 23. Moody’s expects these trends to continue through at least 2021, and doesn’t expect telcos will generate enough cash to pay down debt.

The leading telcos in India pay the largest share of their aggregate revenue for spectrum at 7.6%, followed by Thailand at 7.3% and Bangladesh at 7%, Moody’s said.

The legal dispute dates back to the 1999 telecom policy that mandated license and spectrum fee to be paid by operators as a share of their revenue. Telecom companies have argued that only core income accrued from use of spectrum should be considered for calculation of adjusted gross revenue, while the government has argued that revenue from all operations must be included.

A lower court had ruled in favor of telecom companies but the federal government’s department of telecommunications challenged the ruling in the top court and kept adding to demands, including penalties for all the years.

India Orders Wireless Carriers to Pay $13 Billion in Dues

Related Articles

TSX jumps to two-month high on U.S. inflation relief
TSX jumps to two-month high on U.S. inflation relief By Reuters - Aug 10, 2022

By Fergal Smith (Reuters) - Canada's main stock index rose on Wednesday to its highest level in two months, with technology stocks leading gains after data showed U.S. inflation...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
Sign up with Email