Does Vodafone Idea is going to shut down?

Net outstanding for Bharti and Vodafone Idea stands at INR260bn and INR514bn, respectively. While both will need to raise debt to repay the outstanding dues, Bharti, is relatively better placed and possibly could furnish bank guarantees/other possible solutions, as staggered payments will help Bharti to keep investing in the network, address market share, and even address regulatory dues. Bigger concerns seem to be around Vodafone Idea, which has already suggested that it will be unable to furnish bank guarantees, suggesting it may not be easy for the telco to address the concerns raised by the apex court.

If Vodafone Idea is asked to pay the dues, they will have no other options but to shut down. Separately, the outstanding dues for Vodafone Idea on account of the spectrum are to the tune of USD11.7bn, much higher than the AGR dues of USD 6.8 bn. The same is the case with Bharti, where the spectrum dues are to the tune of USD 5.7bn, much higher than the AGR dues of USD3.4 bn. So, any shutdown or focus purely on only the AGR dues, may impact the ability of the telcos to repay the spectrum-related dues, which are even higher. On the other question around time frame and security, if the 20 years is used by the government, both from a license tenure perspective and spectrum lease/auctions perspective, a similar practice can be applied when it comes to AGR dues.

The apex court in the final hearing of the matter will allow for 20 years, and it is likely to be anything between 10-15 years. Separately, on the issue of security to be furnished by telcos, it's not sure that personal guarantees are a likely possibility more, so when the sector is the most vulnerable to technological disruptions. For instance, telcos invested significantly in the 3G spectrum, but they had to write it off in 7 years and the investments were not restricted to spectrum, but there were significant investments in the network as well. Similarly, with 5G coming up as a possible upgrade for telcos, it is quite possible that telcos, not being able to invest in 5G may lose market share, and may have to take similar write-offs for the investment in 4G. This points to the fact that telcos must have the ability to invest in the network, and that will only be possible if regulatory dues are kept low and staggered over a longer period.