Indian court upholds US$19 bil dues, Vodafone may go bankrupt

NEW DELHI: India’s top court ruled out a reassessment of US$19 billion in past dues to be paid by telecom companies, a move that could send indebted carrier Vodafone Idea Ltd into bankruptcy.

A three-judge panel, headed by Justice Arun Mishra, said it will consider a proposal by Prime Minister Narendra Modi’s administration seeking a 20-year payment plan for dues worth 1.4 trillion rupees.

The years-long case centres around the dispute between the government and mobile carriers over how license and spectrum fees are calculated.

Shares of Vodafone Idea plunged as much as 44% after the court threatened to send heads of telecom companies to jail if dues were not paid as per its previous order. Bharti Airtel Ltd fell over 5%.

“This is sheer fraud taking place in the face of this court. Grossest contempt has already been committed,” Justice Mishra said while hearing the matter. “If you want we can call every managing director of the companies and send them to jail from here only.”

In October, the court sided with the administration and ordered that the full amount be paid within three months. When the companies dithered and filed pleas, it threatened to initiate contempt proceedings for non-compliance.

While the government said its plan was aimed at helping the broader industry and not just Vodafone Group Plc’s local venture, the latest setback particularly deals another gut punch to the beleaguered carrier.

Sinking under more than US$14 billion of debt and mounting losses, the operator is headed toward insolvency in the absence of any relief, Chairman Kumar Mangalam Birla warned in December.

The ruling now leaves few options for Vodafone Idea, which owes US$4 billion – of which it has paid about US$930 million.

It also comes as a disappointment to rival Bharti Airtel, the other survivor of a brutal price war sparked by the entry of billionaire Mukesh Ambani’s Reliance Jio Infocomm Ltd in 2016.

While Bharti Airtel has raised funds to meet the payment demand by way of rights issue of shares and bond sales, Vodafone Idea has pinned its hopes on a relief package. UK-based Vodafone, which owns about 45% of the local venture, has signalled its reluctance to plough any more money.

The government, earlier this week, pegged the balance due from Vodafone Idea and Bharti Airtel at 547.5 billion rupees and 259.8 billion rupees, respectively. The companies have disputed the calculations for years, leading to litigation.

The filing added that the calculations include interest and penalties up to the financial year ending March 2017 and the figures are subject to future audits.