There are lenders to Vodafone Idea Limited (VIL) but more than any other stakeholder, the gear vendors and the tower owners/operators may be the worst hit due to the fallout over paying up Adjusted Gross Revenue (AGR) dues, as per a report in the Economic Times. There are in all four major telecom equipment suppliers, Ericsson, Huawei, ZTE and Nokia. Vodafone Idea has dues of $300 million to Huawei and ZTE and another $240 million to Nokia and Ericsson, which amounts to nearly Rs 4000 crore in total.
It is reported that Nokia and Ericsson have made their supplies backed by letters of credit (LCs) and may have less to worry about. The Chinese companies may not have it so easy getting their money back.
There’s Samsung, but that is an exclusive agreement between the South Korean giant and Reliance Jio. If Vodafone Idea folds up, and leaves only Airtel, it would become difficult for Airtel to deal with all four of them. The list may get pruned to just two and the remaining two will have to review their India presence.
The other entity to be losing sleep over these developments is American Tower Corporation (ATC). The company spent $1 billion to acquire 20,000 cellphone towers from Vodafone. If VIL shuts shop, ATC will be left with assets that will be worthless. Both Jio and Airtel have their own tower infrastructure and may not have much use for the towers owned by ATC. The US company may have to write down the investment.
As things stand, neither Vodafone, the parent entity nor the AB Group led by Kumar Mangalam Birla have any plans of infusing funds to save VIL. A senior executive from Vodafone and KM Birla himself have already issued strong statements on the issue indicating it is virtually the end of the road for the venture.
There is only one thin ray of hope left for Vodafone Idea. The Supreme Court has listed the next hearing for March 17, when the petition to modify the earlier order and offer some relief in the form of waiver of interest and penalty has been sought, comes up.
The Indian telecom sector could well be staring at a two-player scenario (just Reliance Jio and Bharti Airtel) if the kind of noises being heard in the various circles are true. The harsh language used by the Supreme Court last week has sent everyone scurrying for cover. The Court said the telcos have made a mockery of its clear order directing the companies to pay up in three months. The three-month deadline ended on January 23, 2020. The apex court didn’t spare the DoT and the government either. There were indications that the DoT was willing to wait till March 15, 2020 before taking any action on non-payment. The SC took that as a disregard of its judgement.