Vodafone wins arbitration case against govt in $2 bn tax dispute case

 Vodafone Group Plc has won an international arbitration case against the Indian government in a $2 billion tax dispute, two sources with direct knowledge of the matter said.

An international arbitration tribunal in The Hague ruled that India’s imposition of a tax liability on Vodafone, as well as interest and penalties, were in a breach of an investment treaty agreement between India and the Netherlands, one of the sources said.

The tribunal, in its ruling, said the government must cease seeking the dues from Vodafone and should also pay 4.3 million pounds ($5.47 million) to the company as partial compensation for its legal costs, the source said.

Vodafone and India’s finance ministry did not immediately respond to a request for comment.

The tax dispute stems from Vodafone’s acquisition of the Indian mobile assets from Hutchison Whampoa in 2007. The government said Vodafone was liable to pay taxes on the acquisition, which the company contested.

In 2012, India’s top court ruled in favour of the telecom provider but the government later that year changed the rules to enable it to tax deals that had already been concluded.

In April 2014, Vodafone initiated arbitration proceedings against India.

India is entangled in more than a dozen international arbitration cases against companies, including Cairn Energy, over retrospective tax claims and cancellation of contracts.

The exchequer could end up paying billions of dollars in damages if it loses.

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A timeline of the Vodafone tax battle

2007: Vodafone buys Hutchison’s India assets

Sep: Gets tax notice for not deducting tax at source

Oct: Challenges notice in Bombay HC

2008

Dec: Bombay HC dismisses petition, allows tax dept to proceed on showcause notice

2010

May: Tax dept passes order claiming jurisdiction to tax the transaction

June: Vodafone challenges the order through writ petition in Bombay HC (dismissed in September).

Sep: Vodafone moves SC against the HC decision

Nov: Asked to deposit Rs 2,500 cr with SC and provide a guarantee for Rs 8,500 cr

2011

Mar: Vodafone receives a notice asking why it should not be liable for penalties of up to 100%

Apr: SC stays tax dept from enforcing any penalty

2012

Jan: SC says I-T can’t levy tax on the deal

Mar: Retro amendments allow govt to tax such deals

Apr 16: Vodafone issues notice to govt, initiating arbitration for not protecting investor rights

2013

Jan 3: Vodafone received Rs 14,200-crore tax demand (principal and interest, not penalties)

May: Law Minister Kapil Sibal approves a settlement of the tax dispute through conciliation

Jun 4: Cabinet approves non-binding conciliation

Dec 31: Vodafone responds to the govt's conciliation offer

2014

Jan: Vodafone challenges the demand under the Netherlands-India Bilateral Investment Treaty (BIT)

Apr 17: Vodafone serves an arbitration notice under the India-Netherlands Bilateral Investment Protection Agreement (BIPA), after I-T department withdraws conciliation offer without waiting for a tribunal's decision in the transfer pricing case

2016

Feb 12: Vodafone receives a Rs 22,100-crore tax demand (including interest from the date of the first demand)

2017

Jan: Vodafone serves a second arbitration notice — this one under the India-UK BIT

Aug 22: The Delhi High Court restrains Vodafone from participating in the second arbitration

Dec 14: The Supreme Court allows Vodafone to initiate the second arbitration process

2018

May 7: The Delhi HC refuses to restrict Vodafone from pursuing simultaneous arbitrations before two different tribunals on the same dispute

2020

Sep 25: Vodafone is reported to have won the arbitration case. The international tribunal in The Hague is quote as having ruled India’s imposition of tax liability on Vodafone, as well as interest and penalties, in a breach of the India-Netherlands BIPA

Vi is We: Two yrs after merger Voda Idea integrates to create new identity

 Just when everyone had written Vodafone Idea off in India, its joint venture telecom business in the country has sent out a strong signal that it’s going to be around, possibly for years to come. At a virtual roundtable called to announce a strategic decision by Vodafone Idea, the telco, saddled with huge losses and high debt, launched a new brand identity for itself Monday morning. It's the final step in the biggest integration of two telecom brands, top executives said.

Addressing the media, Managing Director and Chief Executive Officer of Vodafone Idea Ravinder Takkar elaborated on the significance of the new brand—Vi (pronounced ‘we’). ‘’The unified brand powers our tomorrow together,’’ he said indicating that the partners would stay invested. Later in the Q&A session, Takkar reserved his comment on whether the two partners will participate in the proposed Rs 25,000-crore fundraising exercise announced last week. He however was clear on the tariff front---prices will have to increase, he said. ‘’We are never shy of raising tariff…and others have followed us often.’’

Showcasing the togetherness, Aditya Birla group chairman Kumar Mangalam Birla and Vodafone Plc CEO Nick Read spoke of a shared future while referring to the government’s Digital India initiative as an important element in their business. This is despite Vodafone plc stating last week that it’s not going to pump in fresh equity in India business where its net losses are pegged at Rs 25,460 crore in the June quarter.

ALSO READ: Vodafone Idea board agrees to raise Rs 25,000 cr through share sale, debt

After keeping people guessing for many hours on what the strategic announcement would be, the firm set off a teaser campaign on the social media late Sunday evening. Soon, the Twitterati got active talking about the ‘VI’ rebranding exercise. VodafoneIn official Twitter account posted, ‘’Hi @Idea, ready for the big day?’’ Idea was quick to respond: "Yes just can’t wait."

The relaunch, coming two years after the August 2018 merger of Vodafone and Idea Cellular, is to have a combined brand identity and advertising around it. Till now, the organisation has been advertising the two brands separately.

Last week, the board of Vodafone Idea had approved plans of raising Rs 25,000 crore funds through share sale and debt. In the same week, the Supreme Court had allowed telcos 10 years of staggered payments in dues linked to adjusted gross revenue (AGR) while asking them to make 10 per cent of the payment upfront by March 31, 2021. Analysts said the court judgment failed to give any relief to the telco which had sought a much longer payment term of 15 to 20 years.

ALSO READ: AGR verdict: Will Voda Idea survive? Answer lies in ability to raise funds

The October 2019 Supreme Court verdict upholding the Department of Telecommunications definition of AGR (DoT), leading to a Rs 1.47 trillion of liability in dues for the industry came as a double whammy to Vodafone Idea after being battered by Reliance Jio’s deep tariff cuts.

Vodafone Idea’s AGR dues are pegged at Rs 50,399 crore, of which it has paid Rs 7,854 crore. Its dues—a combination of two telcos-- are much higher than Bharti’s. DoT calculations show Bharti Airtel owes the exchequer Rs 43,780 crore, of which the company has paid Rs 18,004 crore.

Vodafone has a 44.39 per cent shareholding in the JV while the Aditya Birla Group holds 27.66 per cent. The two partners have equal control in the board. The merger agreement suggests the Birlas can buy an additional 9.5 per cent from Vodafone to equalise their stakes.

Vodafone Idea loss grows to Rs 11,742 cr, says survival depends on SC order

Vodafone Idea has said that its ability to continue as a going concern depends on the Supreme Court giving it a favourable verdict in the adjusted gross revenue (AGR) matter.
The telecom company, which is estimated to have AGR-related dues of more than Rs 46,000 crore, posted a pre-tax loss of Rs 11,742 crore in fourth quarter FY 2020 due to one-off expenses. The result was announced late Tuesday night.

It has sought 20 years to clear the dues and said its survival depends the court verdict and successful negotiations with lenders. Vodafone Idea breached debt covenants as on March end, limiting its ability to generate fresh funds to settle its dues.
"We continue to actively engage with the government to provide relief on various industry related concerns," the company said in its result statement.
The company reported flat revenue growth on a year on year basis. On a sequential basis, revenue rose 6 per cent to Rs 11754 crore due to tariff hike. The company's subscriber base declined to 291 million in fourth quarter from 304 million in the previous quarter while average revenue per user improved to Rs 121 from Rs 109 in the same period.
“Our focus on rapid network integration, as well as 4G coverage and capacity expansion, has further improved customer experience. We thus continue to lead the league tables on 4G data download speeds across several states, metros and large cities. We have achieved our full opex merger synergy target. Despite the nationwide lockdown since March due to COVID-19, our teams across all circles continue to work effectively in these difficult times with support of the local authorities, to ensure seamless connectivity for our customers," said the company's managing director, Ravinder Takkar, in a statement.

Google eyes 5% stake in Vodafone Idea, multiple India investments: Report

Global technology giant Google is in talks to buy a 5 per cent stake in Vodafone Idea, owned by Vodafone Plc of the UK and Aditya Birla Group. The move comes about a month after Google’s biggest rival, Facebook, picked up a 9.99 per cent stake in Reliance Industries’ (RIL’s) Jio Platforms for Rs 43,574 crore.
Taking into account Vodafone Idea’s market valuation of Rs 16,724 crore as of Thursday, Google may end up buying the stake for Rs 836 crore.

The Financial Times reported on Thursday that Google’s parent firm, Alphabet, had also held talks with RIL to acquire a stake in Jio, but lagged behind other investors like Facebook in securing a deal. A banker in Mumbai said Google was seeking a large stake in Jio, but could not get it.
ALSO READ: Abu Dhabi state fund in talks to invest $1 bn in Jio Platforms: Report
“Pursuing Vodafone Idea instead would potentially pit Google against Facebook and an increasingly dominant Jio, but the company could also make multiple investments in India,” the report mentioned. Vodafone Plc and Aditya Birla Group own 44.39 per cent and 27.18 per cent stake, respectively, in Vodafone Idea, and have valued their stake in the company at zero. Both partners have also frozen any fresh investment into the firm in view of its huge losses and liabilities.
chartWhen contacted, a spokesperson for Aditya Birla Group declined to comment. Earlier this month, Vodafone Plc attributed its losses in Vodafone Idea to the adverse legal judgments by the Supreme Court. Besides, the British company said it would have an additional potential exposure of Rs 8,400 crore for the contingent liabilities of the Indian telecom company.
Analysts said the transaction could prove to be a lifeline for Vodafone Idea, which has been ordered by the Supreme Court to pay Rs 53,000 crore in adjusted gross revenues dues to the government. “Though the Google investment is minuscule and will not move the needle, it will attract other investors in the company and be a morale booster,” said a banker.
In the past one month, five global players — Facebook, General Atlantic, Silver Lake, Vista Equity Partners, and KKR —have together picked up a 17.12 per cent stake in Jio Platforms for a total consideration of Rs 78,562 crore. RIL is planning to list Jio Platforms on Nasdaq so as to attract global investments into the country.

Govt takes a call to save telecom firms, but no relaxation likely on AGR

After back-to-back parleys this week between the top management of telecom companies and the government, a consensus seems to have emerged on the need to save the financially stressed sector.
While VodafoneIdea Chairman Kumar Mangalam Birla and Chief Executive Ravinder Takkar did their rounds of the Department of Telecommunications (DoT) and North Block over the last few days, Bharti Airtel Chairman Sunil Mittal joined in as well to seek relief for the telecom industry faced with a bill of Rs 1.47 trillion in pending dues linked to adjusted gross revenue (AGR).

There’s no official word yet from the DoT on what measures were being planned to offer relief, but a senior official on Thursday said, “We are doing everything to save the health of the sector.” A source said the DoT and the Finance Ministry were looking at many steps to bring back the sector on track and that a ‘’monopoly’’ situation was not desirable. A telecom fund to give loans to operators is among the measures being discussed.
The Union government is of the view that there can be a debate on the quantum of payment and penalty but not on the fact that the companies have to make the payments.
In fact, Tata Teleservices, which paid Rs 2,197 crore as full and final in AGR dues on Monday, will be issued a notice seeking full payment of dues as per the Union government's calculation. The company’s dues are estimated at around Rs 14,000 crore. To press its point, the DoT is expected to issue notices to all telcos to pay their dues by March 17.
Mittal, who met Telecom Minister Ravi Shankar Prasad on Thursday, said the sector was heavily taxed and required “rationalisation” in levies. He didn’t comment on AGR dues issue.
To cross-check the AGR dues claims of the telcos, the government has decided to verify their accounts during the last few years in a random fashion. In the case of Tata Teleservices, DoT would ascertain whether the full payment claims made by the company were genuine or not. On the issue of invoking bank guarantees of the companies in case of payment default, DoT is awaiting legal opinion it sought on the AGR issue. The department, under the unified licence agreement, can invoke bank guarantees and convert it into a cash security if the service provider violates any term of the licence. The ministry has sought views on whether the guarantees should be invoked before March 17 (next date of the SC hearing).
“The government has to ensure that the telecom companies comply with the order of the Supreme Court. They have started making payments and have so far paid Rs 15,700 crore,’’ the official said. The government has to ensure that the health of the sector is not impacted and that the Union government meets its obligation towards the customers, according to the official.
It is learnt that during the meetings with the government this week, many telcos conceded they should have paid their dues after 2011, rather than waiting so long. In 2011, the matter was shifted from the SC to the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) for interpretation of the heads and computation thereof.
The AGR dispute started in 2003. On October 24, 2019, the SC ruled that AGR for telcos should include all revenues accrued to carriers, including that from non-core activities, upholding the DoT’s stance. The firms paid 90 per cent of the amount due to the government in 2003. They were supposed to pay the remaining 10 per cent to the government, along with interest, penalty and interest on penalty.
On February 14, SC had rejected the modification applications of Bharti and Vodafone Idea seeking relaxed payment scheme for the AGR dues. The top court directed the companies to make payments immediately, prompting the DoT to issue letters to telcos last Friday that payments must be made by the same midnight.

Voda Idea: As threat of closure looms, Kumar Mangalam Birla meets DoT secy

VodafoneIdea Chairman Kumar Mangalam Birla, MD and CEO Ravinder Takkar on Tuesday called on Telecom Secretary Anshu Prakash amid concerns of its very survival if the government invokes bank guarantee over no payment of adjusted gross revenue (AGR).
The company on Monday paid Rs 2,500 crore on account of its AGR dues and said that another Rs 1,000 crore will be paid by Friday. It is said that funds are being arranged to pay the remaining amount.

Department of Telecommunications (DoT) has sought legal opinion including that of Solicitor General Tushar Mehta on whether to invoke bank guarantees of companies in case they fail to pay their full AGR dues before the next date of hearing on March 17. Any move to encash the bank guarantee would put the operation of highly-stressed Vodafone Idea at risk. The firm has maintained that without relief on the AGR payout, it may not be possible to continue as a going concern. Also, according to a CNBC-TV18 report, Voda Idea has written to the DoT and the Income Tax Department, seeking adjustment of its AGR dues against a Rs 7,000-crore pending tax refund-related to an earlier SC judgment that Vodafone-Hutchison deal was not taxable in India.
ALSO READ: AGR dues: Vodafone Idea on the brink as DoT may invoke bank guarantees
The unified licence agreement states that the licensor or DoT can encash bank guarantees and convert them into cash security if the service provider violates any term of the licence.
Bank guarantees of 16 telcos listed in the SC order of October 24 work out to Rs 37,641 crore. Many of these companies have either shut shop, sold their business or are in the bankruptcy court.
Bharti Airtel and Vodafone Idea on Monday paid Rs 10,000 crore and Rs 2,500 crore, respectively, to the Union government as a portion of their AGR dues. While Bharti has said it would make the remaining payment before March 17, Vodafone Idea has told the authorities it would pay a second tranche of Rs 1,000 crore by February 21. In all, Bharti owes the government Rs 35,500 crore and Vodafone Idea around Rs 54,000 crore in AGR dues.
Tata Teleservices, which had sold its mobile business to Airtel, made a payment of Rs 2,197 crore to the government against estimated dues of around Rs 14,000 crore. However, sources close to the company said Tatas had made the full and final payment. Reliance Jio had already paid Rs 195 crore towards AGR dues.
With that, the government has so far got Rs 14,892 crore in AGR dues from telecom companies, making up for just 10 per cent of the total outstanding amount.
Vodafone Idea, in a letter dated February 15 had informed the DoT that it had initiated the process of mobilising cash from all possible sources of the company, hoping to make the payment within days.
On February 14, SC had rejected the modification applications of Bharti and Vodafone Idea seeking relaxed payment scheme for the AGR dues. The top court directed the companies to make payments immediately, prompting the DoT to issue letters to telcos last Friday that payments must be made by the same midnight.
Coming down heavily on the industry and the government, the court said the companies had violated the order and the case projected a very “disturbing scenario”.
“It appears the way in which things are happening that they have scant respect to the directions issued by this court,” SC said in its order. Soon after, the Union government issued fresh letters seeking full payment of dues from the companies.
Finance Minister Nirmala Sitharaman, in a post-budget interaction with stakeholders, said her ministry had been actively engaging with telecom companies. The Reserve Bank of India was also monitoring the situation.
SC, on October 24, 2019, ruled that AGR for telcos should include all revenue accrued to carriers, including that from non-core activities, backing the DoT's stance in a dispute running over 16 years.

AGR: Voda Idea, Bharti Airtel file modification petition in Supreme Court

VodafoneIdea and Bharti Airtel on Monday filed a modification petition in the Supreme Court, seeking an extension of the January 23 deadline to pay adjusted gross revenue (AGR) dues. Tata Tele also moved the apex court seeking an extension of the deadline according to TV reports.
The latest development comes after the Supreme Court on Thursday rejected a review petition by the telcos, in a massive blow to the telecom industry, facing severe financial stress.

The Supreme Court, in its order on October 24 last year, had asked telcos to pay up their AGR dues within 90 days.
Sources at telecom firms had earlier said it wouldn’t be possible to cough up the entire AGR dues in a week, and that they were looking at the government's approval to a staggered payment. Vodafone Idea and Bharti, the worst hit, have to pay Rs 53,038 crore and Rs 35,586 crore, respectively, towards their AGR dues.

Vodafone Idea will shut shop if govt doesn't provide relief: KM Birla

VodafoneIdea Ltd, India's third largest mobile service provider, will shut down if the government does not provide relief on the liability it faces in past statutory dues following a Supreme Court order, its billionaire chairman Kumar Mangalam Birla said on Friday. "If we we are not getting anything then I think it is end of story for Vodafone Idea," Birla said at the HT Leadership Summit when asked about the future of Vodafone Idea in absence of a government relief on payment of Rs 53,038 crore dues.
Birla's Idea Cellular and British telecom giant Vodafone plc's India unit had merged last year to compete with the onslaught of free voice calling and dirt cheap data unleashed by richest Indian Mukesh Ambani's Reliance Jio. In the process, it accumulated Rs 1.17 lakh crore debt and had just weeks back posted corporate India's biggest loss after it provisioned for the liability arising from the Supreme Court upholding the government's position on what base should statutory liabilities be calculated.

"It does not make sense to put good money after bad. That would be end of story for us. We will shut shop," he said in a response when asked if Vodafone Idea will put in more money. Market leader Bharti Airtel, Vodafone Idea and other telecom players have to pay as much as Rs 1.47 lakh crore in payment of telecom license fee and spectrum usage charge together with interest and penalty for past 14 years. Both Airtel and Vodafone Idea have petitioned the government for relief in waiver of interest and penalty, which will halve the dues, and also filed a review petition in the Supreme Court.
Birla was however hopeful of a relief from the government not just for the telecom sector but the industry as a whole to pull out the economy from a six-year low GDP growth of 4.5 per cent. "They (the government) have realised the fact that this (telecom) is a very critical sector. The whole digital india programme rests on this. This is a strategic sector," he said. The government, he said, has publicly stated that it wants three players from the private sector and one player from the public sector.
"I think that we can expect much more stimulus from the government because it is required for the sector to survive. If we weren't getting anything then I think it is end of story for Vodafone Idea," he said. The government had late last month deferred by two years the payment due to telecom companies for spectrum they bought in past auctions. This relief totalled Rs 44,000 crore for the industry but companies are expected to pay this due together with interest after the two year moratorium.
Asked about the specific relief sought, Birla said, "The big elephant in the room is AGR. Which is actually I think something which lies in the court of judiciary. I believe government can have a dialogue. This was a suit filed by the government against telecom service providers." Adjusted gross revenues (AGR ) refers to a percentage of which the telecom companies pay as statutory dues. The Supreme Court had upheld the government position that non-telecom revenues have to be included in the AGR for calculating dues.
"Since the government has won, it gives them headroom to talk to judiciary and try to find some of solution. I don't know which form or shape it takes," he added.

Vodafone Idea to raise mobile call, data charges from December 3

In a first mobile tariff hike in past four years, telecom operator VodafoneIdea on Sunday announced new plans under which call and data charges will be dearer for its pre-paid customers by up to 42 per cent from December 3.
Besides this, Vodafone Idea will also charge 6 paise per minute for every outgoing call made by customers on to the network of other operators.

"Vodafone Idea Limited (VIL), India's leading telecom service provider, today announced new tariffs/plans for its prepaid products and services. New plans will be available across India starting 00:00 hours of 3 December 2019," the company said in a statement.
The company has announced new plans in "unlimited"category with 2 days, 28 days, 84 days, 365 days validity which on the back of the envelope calculations show are costlier by up to 41.2 per cent.
Vodafone Idea has only revised rates of plan promising unlimited mobile and data services and also introduced some new plans.
A company official explained all the existing plans in unlimited category will be replaced by the new plans from December 3 and new plans will be introduced or revised based on market response.
Though the company classifies a set of plans in 'unlimited' category, these actually come with usage limit for data at a promised speed and 100 SMS per day limit.
The highest rate of increase of 41.2 per cent has been announced by the company in annual unlimited category plan which will cost Rs 2,399 instead of 1,699 at present.
The starting plan with data offering of 1.5 Gb per day with 84 days validity in "unlimited" category will cost around 31 per cent more at Rs 599 compared to Rs 458 at present.
The company will raise the price of Rs 199 unlimited plan, which offers 1.5 Gb data per day, by about 25 per cent to Rs 249.
Vodafone Idea which is reeling under massive debt of around Rs 1.17 lakh crore had earlier cited acute financial stress on the company behind the decision to raise mobile call and data charges.
Vodafone Idea last month reported a consolidated loss of Rs 50,921 crore -- the highest ever loss posted by any Indian corporate -- for the September quarter on account of liability arising out of the Supreme Court's order in the adjusted gross revenue (AGR) case.
The company has estimated liability of Rs 44,150 crore post the apex court order, and made provisioning of Rs 25,680 crore in the second quarter this fiscal.

After $13-bn AGR hit, future of India's tattered telecom hinges on govt aid

The Indian government's win of a long-contested dispute over telecom fees could end up a Pyrrhic victory, as the billions of dollars in levies now owed are seen as burdens too big to bear for two of the country's three main carriers.
Vodafone Idea Ltd, India's biggest carrier by user numbers, is widely regarded as most on the ropes, with parent Vodafone Group calling the situation "critical" after the unit was saddled with about $3.9 billion in fresh payments due.
That is the biggest portion of the $13 billion incurred by the sector after India's Supreme Court last month sided with the government in how spectrum usage and licence fees are calculated.
Bharti Airtel, the No 3 provider which must pay roughly $3 billion under the ruling, has also flagged distress, saying the decision casts much doubt on "its ability to continue as a going concern."
To industry executives and analysts alike, there's only one solution for the sector which was even before the current crisis debt-ridden and battered by a brutal price war: significant government financial support.
Hopes have been raised after the government deferred upcoming spectrum payments for the next two financial years until March 2022. Finance Minister Nirmala Sitharaman also said this month that relief is under consideration although no final call had been made.
"If the government does provide some measures, there is still some chance for (Vodafone Idea) to continue as a going concern. It all depends on what kind of relief measures the company will get," said Umesh Mehta, head of research at Samco Securities.
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He said he expects the company to survive as it is in the government's interest to have three main players to ensure sufficient competition in the sector.
Vodafone Idea and Bharti Airtel did not respond to requests for comment. Vodafone Group declined to comment.
Entreaties made
Vodafone Idea this month booked a $7 billion quarterly loss, the biggest in Indian corporate history, in large part due to provisions for payments owed. Parent Vodafone has also laid its case on the line: writing down the value of its 44 per cent stake in the unit to zero and vowing it will not commit more equity to India.
In addition to the two-year moratorium, Vodafone Idea and Bharti Airtel are asking the government for cuts to license fees and taxes, as well as waivers for interest and penalties.
Mobile carriers have also petitioned the Supreme Court to review its ruling, although lawyers say chances of that happening are slim.
ALSO READ: Explained: Is mobile tariff hike by Airtel, Vodafone Idea justified?
But even if the government obliges with generous financial waivers, analysts note Vodafone Idea would still be deeply troubled.
Hurt by the price war that began with the 2016 entry into the market of Jio, a unit of deep-pocketed Reliance Industries Ltd, Vodafone Idea has net debt of $14.2 billion, six times its market capitalisation and four times its cash holdings.
While the price war appears to have ended with all three main carriers - who serve 90 per cent of the market - planning to lift user fees next month, Vodafone Idea has not yet stopped losing subscribers. The latest data, for September, showed a net loss of 2.6 million customers.
"If Vodafone Idea doesn't have enough customers left, it is going to be very difficult for it to remain solvent," said Vivekanand Subbaraman, an analyst at Ambit Capital.
Bharti Airtel has more debt, with net levels at around $16 billion. But unlike Vodafone Idea, analysts say if push came to shove, the company could consider selling assets to meet its obligations as it controls telecom tower firm Bharti Infratel.
Duopoly danger
If in a worse case scenario Vodafone Idea were to fail, customer options would dramatically shrink and the networks of the two remaining major carriers would be further overloaded, exacerbating patchy coverage and call drops common in India.

ALSO READ: Kumar Mangalam Birla loses $3 bn as Voda-Idea's mounting debt takes toll
"There's bound to be more congestion, there is going to be further deterioration in quality," said T.V. Ramachandran, president of Broadband India Forum.
It would also represent a huge setback to India's push to make government services accessible to hundreds of millions of Indians via the internet.
Any exit would hurt telecom gear makers such as Finland's Nokia, Sweden's Ericsson and China's Huawei Technologies and ZTE Corp, industry executives said.
ALSO READ: Jio joins Airtel, Voda Idea in raising tariff; higher rates in a few weeks
Bharti Airtel and Vodafone Idea use equipment and services from all of these vendors, unlike Reliance's Jio, whose network has been built largely by a unit of South Korea's Samsung Electronics.
The current turmoil in the sector is also likely to further dampen interest in an auction of 5G airwaves expected before end-March. All three firms have warned the base price set by the government is too high given that India's user fees are among the cheapest in the world.
"Even otherwise, the 5G auction did not look very bright," said Broadband India Forum's Ramachandran.

Kumar Mangalam Birla loses $3 bn as Voda-Idea's mounting debt takes toll

The financial distress at Vodafone Group Plc’s Indian venture has dragged down the wealth of Kumar Mangalam Birla, whose group is the second-largest investor in the teetering wireless carrier.
The tycoon, who joined forces with the British operator last year, has lost about a third of his fortune since the end of 2017 as mounting losses and debt decimated the equity of the troubled Vodafone Idea Ltd. In addition, shares of his flagship firms that produce chemicals, metals and cement have also tumbled amid a demand slump, eroding his wealth.

The net worth of Birla has shrunk to about $6 billion from $9.1 billion two years ago, according to the Bloomberg Billionaires Index. A majority of his fortune is derived from his ownership of Aditya Birla Group, a conglomerate that controls his main holdings.
Birla is the latest mogul to burn his fingers in India’s cutthroat phone-services market since Mukesh Ambani’s Reliance Jio Infocomm Ltd. entered the fray in 2016 and drove two rivals to bankruptcy. Formed by the merger of Vodafone’s local unit and Birla’s cellular operator, Vodafone Idea last week reported the worst loss in the nation’s corporate history, while the British partner flagged the risk of a collapse.
Aditya Birla Group has a stake in Hindalco Industries Ltd., the world’s largest aluminum rolling company, and owns a part of Grasim Industries Ltd., which controls India’s biggest cement maker.
For the Aditya Birla Group, the hit on the telecommunications business couldn’t have come at a worse time. Cooling global growth amid a trade war between the U.S. and China, as well as an economic slowdown at home has curbed demand for industrial raw materials the group produces.
Vodafone Idea’s woes deepened last month after India’s top court sided with the government’s demand for $4 billion in fee-arrears from prior years. Already burdened by $14 billion of debt, the order came as a blow to its finances weakened by a brutal war with Jio. Ambani’s operator this year became the country’s No. 1 carrier with 380 million users by offering free calls and cheap data.
Shares of Vodafone Idea, in which Birla’s groups owns a little over 27%, have plunged almost 90% since end-2017 in Mumbai, shrinking its market value to $2.6 billion. The stock fell as much as 9% on Friday.
“Vodafone and Idea have been going through a complex merger and, at the same time, trying to keep their heads above water in the battle with Reliance Jio,” said Rishikesha T. Krishnan, a professor of business strategy at the Indian Institute of Management in Bangalore. “The Supreme Court judgment came at the most inopportune time.”
Hindalco, which makes aluminum and copper, reported a 33% drop in profit for the latest quarter as the prices of both the metals slid in the three months through September. Shares of Hindalco have tumbled 31% since end-2017, cutting its market value to $5.9 billion. The S&P BSE Sensex has gained 19% in the same period.
The slowdown in India’s $2.7 trillion economy has cooled demand for commodities such as cement to chemicals and textiles manufactured by Grasim. Its stock has dropped 33% since end-2017. Vodafone Idea’s troubles have also weighed on Grasim, which owns about 12% of the carrier.
This week brought some signs of relief to Vodafone Idea shareholders. Its shares have more than doubled in the four days through Nov. 20 as the three rivals -- including Jio and Bharti Airtel Ltd. -- signaled an end to the price war. Bharti reported a record quarterly loss last week as well.
On Wednesday, the government deferred airwave payments for two years, providing some relief for the industry roiled by high license fees and spectrum costs. Finance Minister Nirmala Sitharaman has said she wants all companies to flourish and none to fail.
“The tariff hikes are positive,” Jefferies analysts led by Piyush Nahar said in a note this week. Despite the positive move, relief from the government remains crucial, especially for Vodafone Idea, they wrote.

Telecom infrastructure in India may soon get disaster-resilient standards

Telecommunications infrastructure in the country will soon have international standards that will make these resilient in times of natural disaster.
Power infrastructure in the country already follows statutory standards for safety but telecommunications does not. As part of the global Coalition for Disaster Resilient Infrastructure (CDRI), the National Disaster Management Authority (NDMA) has initiated discussions with the telecom players — Bharat Sanchar Nigam, Airtel, Reliance Jio, and Vodafone Idea — to develop standards for the sector.

Kamal Kishore, member, NDMA, said loss of towers was only 3 per cent during the Cyclone Fani earlier this year. But that was because these have only eight-hour-long power back-up and the power supply had snapped.
Restoration took a lot of time. Besides, there was damage to optic fibre cable while trees were being cleared.
“We have to look at infrastructure in a systematic way and whether the existing standards are future ready. In telecommunication, we will be working out standards. There are ways of managing risks and losses. If you spend 3 per cent extra you get 20 per cent more resilience. Where specific risk cannot be assigned, then you bear that loss. Where there is probability, take insurance and have a risk pool,” said Kishore.
Standards would be both prescriptive as well as performance-related that ask for resurrection in a time-bound manner.
The CDRI, conceived over 2018-19, involves consultations with more than 35 countries. It is a partnership of national governments, United Nation agencies and programmes, multilateral development banks and financing mechanisms, the private sector, and knowledge institutions that aim to promote resilience of new and existing infrastructure systems to climate and disaster risks, thereby ensuring sustainable development.
According to Kishore, mortality during natural disaster is going down in most parts of the world but livelihood impact is huge.
“We have to go beyond from saving life to saving livelihood. Investment in infrastructure is huge. In the next 20 years, more infrastructure will be built than what was done in the last 200 years. So it is important to get it right in the first go,” he said.
Traditionally, when you build infrastructure, it is based on data of past 100 years for risk and sustainability, but the next 100 years are not considered.
Kishore said certain segments of infrastructure, such as telecommunication, lack experience and standard. Lessons need to be absorbed quickly.
The CDRI secretariat at NDMA has hosted two international events where it engaged with 40 countries and academic institutions like the United Nations, World Bank, Asian Infrastructure Investment Bank and Asian Development Bank to come up with a framework.
The focus is on risk assessment, standards and regulations, finance and post disaster recoveries.
For India, CDRI is also focussing on power sector and things like underground cabling in distribution of power could be one way. A project in coastal Odisha will cover distribution, transmission, generation and supply chain to support power generation. “In power sector, there are certain standards that are already prevalent like those laid down by the Central Power Research Institute in Bangalore but we have to see if they are adequate for the future,” he said.
According to Kishore, there were two factors while planning for infrastructure--one is the state of resilience and second, the preparedness to recover. “You cannot have infinite resilience. There will be events that exceed design parameters. It could be earthquake, floods and landslides.
Different segments of infrastructure do not have the same level of criticality. For instance, one road or bridge connecting a remote area maybe more critical than a road to a place that has connected by other modes, too.
“In our response to disaster, we are doing well but when it comes to saving livelihood, we have to do a lot more. Like people demand swift action from National Disaster Relief Force, there will be social demand for reliable infrastructure. For disaster risk reduction, this is the next level,” said Kishore.
Within two to three years, the coalition aims to have a three-fold impact of achieving considerable changes in policy framework of member countries, future infrastructure investments and high reduction in economic losses from climate-related events and natural disasters across sectors.
The CDRI follows the UN Agenda 2030 principle of “leaving no one, no place, and no ecosystem behind, focusing on the most vulnerable regions and populations, while enabling inclusive and deliberative processes that recognize national and local efforts as primal”.

Jio, Vodafone Idea, Airtel pay govt over Rs 4500 crore in spectrum dues

Private telecom operators Reliance Jio, Vodafone Idea and Bharti Airtel have paid the Telecom Department over Rs 4,500 crore in spectrum dues in the last three to four days, according to sources.
Sources said that the payments came in before the due date.

The sparring telcos — some of which are reeling under acute financial stress and are seeking immediate relief measures — have made the payment towards deferred spectrum liability (or instalment payment for radiowaves bought in past auctions) which fell due on October 21.
While Mukesh Ambani-led Reliance Jio has paid Rs 1,133 crore to the Department of Telecom, Vodafone Idea has made Rs 2,421 crore payment towards spectrum dues. Sunil Mittal's Bharti Airtel has paid Rs 977 crore. Taken together, these three players have paid over Rs 4,531 crore towards spectrum dues late last week.
Emails sent to Reliance Jio and Airtel went unanswered, while a Vodafone Idea spokesperson said that the company does not comment on matters that are business as usual.
The government, in March last year, enhanced the number of annual instalments for spectrum payment from 10 to 16 years to provide a breather to the debt-laden telecom sector.
But with the industry reeling under financial stress, Vodafone Group Chairman Gerard Kleisterlee and CEO Nick Read recently met Telecom Secretary Anshu Prakash, as the company sought a two-year moratorium on deferred spectrum payments, and other relief measures from the government.
The British telecom giant has asserted that it is focused on the successful integration of business between Vodafone and Idea.
The telecom sector has been battered by falling tariffs, eroding profitability and mounting debt in the face of stiff competition triggered by disruptive offerings of Reliance Jio. The industry has been seeking urgent relief such as cut in levies like licence fee and spectrum charges, and release of GST input tax credit locked up with the government.
In a sector stung by policy and regulatory issues, battlelines have been drawn more recently over the contentious matter of call connect charges, where the regulator is reviewing whether or not the zero termination charge regime should be pushed back from the originally-stated timeline of January 1, 2020.
Reliance Jio has alleged that any review of call connect charges by Telecom Regulatory Authority of India (TRAI) "sabotages" the Prime Minister's vision for Digital India, and will hit not only the regulator's credibility but also investor confidence as the move protects vested interests of some old operators. Bharti Airtel has favoured continuation of call connect charges till 2022.
Vodafone Idea and state-owned BSNL too have favoured levying of the interconnect usage charge (IUC), currently 6 paise per minute, on every incoming calls from the network of other operators.

Vodafone Idea gets shareholders' nod to raise share capital to Rs 50,000 cr

Telecom operator Vodafone Idea has received shareholders' approval to raise its authorised share capital to Rs 50,000 crore, according to a regulatory filing by the company on Wednesday.
The increased authorised share capital provides headroom for the company to infuse additional funds.

"The members have approved increase in the authorised share capital of the company from existing Rs 3,02,93,00,20,000 (over Rs 30,293 crore) to Rs 5,00,00,00,00,000 (Rs 50,000 crore) by amending clause V of the memorandum of association," Vodafone Idea said in a BSE filing.

The proposal was approved by over 92 per cent shareholders in the annual general meeting of the company held on Tuesday.
The proposal to increase the share capital follows Rs 25,000 crore rights issue which led to the issue of additional shares by the company.
The shareholders also approved Vodafone Idea's proposed transactions with Bharti Infratel and Indus Towers about company's plan to monetise 11.15 per cent stake in Indus Tower.

Ravinder Takkar appointed Vodafone Idea CEO; Balesh Sharma steps down

Mobile operator Vodafone Idea on Monday said Balesh Sharma has stepped down as its CEO citing personal reasons.
Ravinder Takkar, currently Vodafone Group's representative in India, will be appointed as the new MD and CEO with immediate effect, the company said in a statement.

"The Board of Vodafone Idea today announced that it has accepted Balesh Sharma's request for personal reasons to step down as CEO of Vodafone Idea. Balesh will be taking up a new role with Vodafone Group, which will be announced in due course," the statement added.

Vodafone Idea narrows consolidated loss to Rs 4,873.9 cr in June quarter

India's largest telecom operator Vodafone Idea Ltd Friday narrowed its consolidated loss to Rs 4,873.9 crore for the June 2019 quarter.
The company had registered a loss of Rs 4,881.9 crore in the fourt quarter of 2018-19, Vodafone Idea Ltd said in a regulatory filing.

The merger of the India unit of Vodafone Group and Idea Cellular was completed on August 31, 2018, and the numbers of June quarter are not comparable with those in the year-ago period.
The revenue of Vodafone Idea for the June 2019 quarter fell to Rs 11,269.9 crore as against Rs 11,775 crore logged in the January-March 2019 quarter.
Established operators like Bharti Airtel, Vodafone Idea Ltd are in the midst of a bruising tariff war following the entry of Reliance Jio, backed by India's richest man Mukesh Ambani.
Vodafone Idea said the first quarter revenue "declined by 4.3 per cent quarter-on-quarter primarily due to churn of customers who recharged with 'service validity vouchers' in the fourth quarter as well as ARPU (average revenue per user) downtrading".
The filing added that the company has closed its rights issue, raising Rs 25,000 crore.
"We are delivering on our stated strategy although the benefits are not yet visible in our topline. As we continue to integrate our networks, our customers' data experience is significantly improving in most service areas..." Vodafone Idea CEO Balesh Sharma said.
He added that the company is well on track to deliver its synergy targets by the first quarter of FY21.
The company said its capex spend for the first quarter was Rs 2,840 crore, and its gross debt as on June 30, 2019 was at Rs 12,044 crore.
The company's subscriber base declined to 320 million from 334.1 million in the fourth quarter.
Jio's free voice and dirt-cheap data offering have dented the financial metrics of older operators, deepening the impact of regulatory decisions like cut in termination charges, even though the voice and data usage have been growing at a scorching pace.
Last week, Reliance Jio - which is now India's second largest telecom operator in subscriber base - posted 45.6 per cent rise in net profit for June quarter of 2019-20 to Rs 891 crore.
For the first quarter ended June 30, Reliance Jio's operating revenue stood at Rs 11,679 crore, up 44 per cent over the year-ago period. Its subscriber base stood at 331.3 million as on June 30, 2019.

Vodafone Idea's consolidated loss narrows to Rs 4,882 cr in March quarter

Vodafone Idea Ltd, India's largest telecom operator, on Monday reported a consolidated loss of Rs 4,881.9 crore for the quarter ended March 31, amid a brutal tariff war in India's telecom market.
Seen sequentially, the loss narrowed from Rs 5,004.6 crore for the December quarter of 2018-19. While the company had recorded a comprehensive loss of Rs 962.2 crore in the corresponding quarter a year ago, there cannot be a year-on-year comparison as the merger between Vodafone India and Idea Cellular was completed only on August 31, 2018, news agency PTI reported.

For Vodafone Idea, whose financials have been battered by an intense price competition posed by Reliance Jio, promoted by India's richest man, Mukesh Ambani, the revenue from operations for the March quarter of 2018-19 came in at Rs 11,775 crore, almost unchanged from Rs 11,764.8 crore in the previous quarter.
The company's average revenue per user (ARPU) grew by 16.3 per cent quarter on quarter to Rs 104 in the March quarter from Rs 89 in the December quarter.

Vodafone Idea promoters contribute Rs 17,920 crore to rights issue

Promoters of Vodafone Idea contributed Rs 17,920 crore to its Rs 25,000 crore rights issue compared to their commitment of Rs 18,250 crore following over-subscription of the scheme, the company said Sunday.
With this contribution, the promoters' stake in the country's largest telecom operator increased marginally to 71.57 per cent from 71.33 per cent.

"The Company witnessed participation from both domestic and foreign public shareholders. The issue was oversubscribed approximately 1.08x and the public participation was approximately 1.2x.
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"The promoter / promoter group applied for higher than their aggregate rights entitlement in line with their earlier commitment, however, due to strong demand from public shareholders, the final allotment to the promoter / promoter group was Rs. 179.2 billion," Vodafone Idea said in a statement.
The promoter shareholders -- Vodafone Group and Aditya Birla Group -- had earlier reiterated to the board that they intend to contribute up to Rs 11,000 crore and up to Rs 7,250 crore respectively, amounting to total of Rs 18,250 crore, as part of the rights issue.
"Post allotment, the total promoter / promoter group aggregate shareholding is 71.57 per cent versus 71.33 per cent as on the record date (April 2, 2019)," the statement said.
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"We are progressing well on integration and are well on track to deliver our synergy targets. Our ongoing investments are improving broadband coverage and capacity, enabling us to offer a superior network experience to our customers as well as enhancing our ability to win new broadband customers," said Balesh Sharma, CEO, Vodafone Idea.
The Capital Raising Committee of the board of directors of Vodafone Idea Limited at its meeting Saturday approved the basis of allotment of equity shares to the eligible shareholders including renouncees, to conclude India's largest rights issue offering.
"We are pleased to announce the successful closure of India's largest rights issue offering, which witnessed participation from promoters along with the strong demand from other marquee existing shareholders and new investors.
"This funding along with the monetisation of our stake in Indus will allow us to make the required investments in the business to achieve our strategic goals," said Akshaya Moondra, CFO, Vodafone Idea.
ALSO READ: Voda Idea to seek shareholder nod for divesting fibre assets to Voda Towers
The board of directors on March 20 cleared the Rs 25,000-crore rights issue at a price of Rs 12.50 per equity share, a steep 61 per cent discount to the prevailing market rate.
In a regulatory filing, the company had said the rights entitlement ratio has been fixed at 87 equity shares for every 38 shares held by eligible shareholders of the company on the record date (April 2, 2019).
The rights issue opened on April 10 and closed on April 24.
According to Citi Research, the successful completion of the capital raise is positive for the company as it could strengthen the balance sheet, remove going concern risks, and help enhance network capacity and coverage.
The new shares are expected to be listed on the BSE and NSE on or around May 10, 2019.

Vodafone Idea announces multi-million dollar IT outsourcing deal with IBM

India's largest telecom operator Vodafone Idea Ltd Friday announced a five-year multi-million-dollar IT outsourcing deal with tech giant IBM.
"...this engagement will also contribute to Vodafone Idea's merger synergy objectives by reducing its IT related costs," the telecom firm said in a statement.

The company did not divulge the size of the deal but some reports pegged it at about $700 million.
"The collaboration will provide Vodafone Idea with a hybrid cloud based digital platform to enable more intimate engagement with its over 387 million subscribers (as of December 31, 2018), enhancing business efficiency, agility and scale plus simplification of its business processes," it said.
The new infrastructure platform will remove constraints to exponential growth of data usage driven by increasing consumption of video, streaming and digital commerce, the statement said, adding that it will also drive enhanced customer experience to millions of connected consumers and businesses in India.
"Vodafone Idea is collaborating with leading global technology partners including IBM to deploy new age technologies with built-in customisations and novel innovations. We believe that use of IBM's hybrid and multicloud, analytics and AI security capabilities will accelerate Vodafone Idea's progression to an open, agile and secure IT environment," the statement said.
The deal will also provide a platform for fast-track joint initiatives in Artificial Intelligence and Internet of Things.
"This five-year collaboration with IBM, opens new opportunities for us to partner together in domains like cloud, AI (Artificial Intelligence) and IoT (Internet of Things). We will also be able to leverage collateral from the cloud partnership already announced between Vodafone and IBM in Europe. Achieving synergies post-merger from the combination of Vodafone India and Idea Cellular is a strategic priority for us and we continue to be ahead of track," Balesh Sharma, CEO, Vodafone Idea, said.
IBM is supporting Vodafone Idea with an option of extended flexible payment plan structure for the term of the contract through its wholly owned subsidiary, IBM Global Financing.
"IBM will continue to seamlessly deliver enhanced services for Vodafone Idea leveraging its prior capabilities with Vodafone India and Idea Cellular. It will consolidate applications, and infrastructure including data centers, disaster recovery centers, and further accelerate existing cloud usage," Vodafone Idea said.
The solutions deployed by Vodafone India and Idea Cellular earlier will be merged and big data capabilities enhanced.
"Vodafone Idea will also leverage Dynamic Automation and Robotic Process Automation to drive efficiency and standardisation across IT operations. AI and machine learning based cognitive solutions aim to provide Vodafone Idea with a secure environment ensuring regulatory compliance, intelligent threat detection, and data protection," the statement added.

Vodafone Idea reports Rs 5,005-crore loss for Oct-Dec quarter post merger

Telecom operator Vodafone Idea on Wednesday reported a consolidated loss of Rs 5,005.7 crore for the third quarter of 2018-19.
The books of Vodafone Idea recorded comprehensive loss of Rs 1,284.5 crore in the same quarter a year ago. However, the year-on-year figure is not comparable as the merger between Vodafone and Idea completed on August 31, 2018.

The loss, however, widened on a sequential quarter basis.
Total income of Vodafone Idea stood at Rs 11,982.8 crore during the reported quarter. The income increased by 52 per cent compared to Rs 7,878.6 crore in the previous July-September quarter.
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"The initiatives taken during the quarter started showing encouraging trends by the end of the quarter. We are moving faster than expected on integration, specifically on the network front, and we are well on track to deliver our synergy targets," Vodafone Idea CEO Balesh Sharma said.
The books recorded total income of Rs 6,551.6 crore in the same quarter a year ago.
ALSO READ: Vodafone Idea board approves plan to raise Rs 25,000 cr via rights issue
"We remain focused on fortifying our position in key districts by expanding the coverage and capacity of our 4G network, and target a higher share of new 4G customers while offering an enhanced network experience to our customers. The proceeds from the announced capital raise will put us in a strong position to achieve our strategic goals, Sharma said.