Vodafone Idea Dues: Govt Mulls $22.5 Billion Settlement To Revive Telecom Giant — Details Here

India is all in for a one-time settlement of its longstanding demand for billions of dollars in past-due fees from Vodafone Group Plc’s beleaguered local venture, as the government seeks to strengthen ties with the UK, people familiar with the matter told Bloomberg.

According to the report, the resolution of this financial dispute of nearly Rs 2 trillion may come through a waiver of interest and penalties, followed by a concession on the principal, claimed the individuals who requested anonymity, as the conversations are confidential.

According to them, officials are working on the framework and considering ways to make sure that any agreement won't lead to legal challenges from other telecom companies that owe money.

Vodafone Idea has been plagued by arrears and hasn't posted a quarterly profit since 2016. According to the report, as informed by the individuals, a settlement might open the door for the third-largest telecom provider in India to draw in new investors.

The local branch of the British company and Idea Cellular Ltd., owned by billionaire Kumar Mangalam Birla, merged to establish Vodafone Idea. 

By strengthening the UK's position as a partner, its revival would benefit India internationally and assist in maintaining competition in the nation's telecom industry.

At a time when relations with the US have soured following President Donald Trump's return to the White House, New Delhi will especially gain from strengthening ties between the UK and India, which just signed a free trade agreement.

The argument for giving priority to already-thriving partnerships is further supported by the fact that attempts to restore relations with next-door China are barely getting started.

According to one of the persons, the endeavor is even more urgent because British Prime Minister Keir Starmer is expected to visit India this week.

Bloomberg also informed that an email asking for feedback on the resolution plan was not answered by a representative for Vodafone Idea or the Indian telecom ministry.

The Government, this year, became a 49% shareholder of Vodafone Idea through a debt-to-equity swap, and has publicly acknowledged the need for a solution.

Last month, a government lawyer informed the Supreme Court that since public monies are already invested in the carrier, “some solution may be required.”

The dispute itself pertains to how India calculates annual adjusted gross revenue (AGR), a share of which is paid as license and spectrum fees.

According to one of the individuals, even though telecom companies have been contesting the approach for years, if the government changes its position, the court might be more accommodating this time.

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Since the Tata Group's wireless carrier and Sunil Mittal's Bharti Airtel Ltd. have also been requesting relief, officials will undoubtedly need to make sure that all telecom operators receive equitable treatment during the AGR relief process. 

To ensure that Vodafone Idea isn't given an unfair edge over competitors, one idea being discussed is to ask all operators to offer revival plans in exchange for any concessions.

With inputs from Bloomberg, according to the individuals, Vodafone Idea has been in dire need of funding, and any possible agreement with a new partner depends on the AGR burden being clarified.

The biggest intervention in India's telecom industry since the government intervened to acquire a nearly majority interest in Vodafone Idea would occur if New Delhi moves forward with a solution.

On October 6, the Supreme Court will consider Vodafone's appeal contesting the government's Calculation of its AGR obligations.

(With Inputs From Bloomberg)