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Vodafone Idea news: if Vodafone Idea goes offline, India charges the bill

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NEW DELHI: India faces a multimillion dollar coup in its economy and a tarnished reputation as a place for multinationals to invest unless they can keep Vodafone Idea in business.

Vodafone Idea, a joint venture between Vodafone Group Plc of Great Britain and the Idea Cellular of India, is the most vulnerable mobile phone operator ordered on Friday to immediately pay billions in unpaid fees and interest from the government after a ruling of the Supreme Court.

He has said he cannot immediately pay the $ 3.9 billion he owes and his ability to survive was contingent upon the government agreeing on a flexible payment schedule.

With 13,000 direct employees and bank loans of approximately $ 3.8 billion, the potential exit of Vodafone Idea would cause shock waves in the Indian economy, which is already growing at its slowest pace in 11 years.

“A breach of such a large scale could increase India’s fiscal deficit by approximately 40 basis points,” said Aliasgar Shakir, research analyst at Motilal Oswal.

An increase of 40 basis points in the fiscal deficit translates approximately into a loss of income of approximately Rs 1 lakh crore ($ 14.01 billion) for the government of Prime Minister Narendra Modi, when facing the country’s first fall in taxes Direct in decades.

Another problem is that Vodafone Idea’s departure would essentially leave a duopoly between Bharti Airtel and Reliance Jio, which is backed by the richest man in Asia, Mukesh Ambani.

That could reduce interest in an auction of expected 5G waves before the end of March.

A former Vodafone Idea executive, who asked not to be identified, said the risk of deterring the investment was high.

“They have been hit by the environment here,” the executive said. “(We are sending investors) a very negative signal: it says that the trust factor between the government and the industry does not exist.”

There are no easy answers.

The risks are not lost in Delhi, but finding a solution is difficult.

Two official sources said the government sought to develop a plan that would not violate the court order.

“(The government) is concerned about what is happening in the sector and its impact on the investment climate,” said a senior official of the Ministry of Finance, asking to remain anonymous.

A separate source said the government sought to structure a relief plan before the next court hearing on March 17, but refused to provide details. The telecommunications ministry has been talking to the prime minister’s office to solve the problem, the official added.

Telecommunications sector lawyers said the government could urge the court to allow companies to pay for a longer period of time.

The Indian Ministry of Telecommunications did not immediately respond to a request for comment.

Modi has faced criticism for not creating jobs in a country where about one million job seekers enter the market each month. Even some in the business sector, who widely encouraged him to power, have turned against him. State banks are already charged with about $ 140 billion in stressed debt.

Although necessary, some analysts are skeptical that the government can develop an aid plan on time.

Telecommunications companies still have some options, including the presentation of a curative petition before the Supreme Court, although analysts see little chance of success.

“The acceptance of a curative petition in itself is a burdensome task, and with the tough stance of the Supreme Court now, the merits of opting for this route may have diminished,” Morgan Stanley said in a note to clients.

Meanwhile, Vodafone Idea has said it will pay Rs 3,500 crore ($ 490 million) in installments to the government before February 21. Rival Bharti Airtel paid $ 1.40 billion (Rs 10,000 crore) on Monday, less than a third of the total he owes.

Times of India

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