Indian lobby group warns of telecoms sector catastrophe

Credit: REUTERS/RUPAK DE CHOWDHURI

India's telecoms sector and leading players Bharti Airtel and Vodafone Idea will face an "unprecedented crisis" if the government refuses to relax its demand for $13 billion in outstanding dues, a lobby group says.

By Aditya Kalra and Sankalp Phartiyal

NEW DELHI, Oct 30 (Reuters) - India's telecoms sector and leading players Bharti Airtel BRTI.NS and Vodafone Idea VODA.NS will face an "unprecedented crisis" if the government refuses to relax its demand for $13 billion in outstanding dues, a lobby group says.

Bharti and Vodafone Idea have been spooked by the Indian Supreme Court's decision last week to uphold a government demand that will force the companies to pay the bulk of 920 billion rupees ($13 billion) in overdue levies and interest.

The Cellular Operators Association of India (COAI) lobby group has joined the fray, seeking the intervention of India's telecoms minister in a letter dated Oct. 29, arguing that such payments will lead to a crisis at the companies and cause distress for the sector as a whole.

"Investments could be curtailed, services could deteriorate, jobs could be lost and investor confidence will most definitely be shattered," COAI Director General Rajan S. Mathews said in the letter seen by Reuters.

"The impact of this crisis could exacerbate the stress in the industry and potentially be catastrophic for the nation."

The government's telecoms department did not respond to a request for comment.

On Monday, a government source said that a panel of bureaucrats had been formed to suggest ways to alleviate financial pressures on the sector.

The $13 billion demand could also place in jeopardy the 600 billion rupees ($8.5 billion) of annual payments the two operators make to the government and threaten the companies' ability to service existing debt, the COAI said in the letter.

"Such an adverse outcome will trigger a chain of events which will result in disruption to the entire business chain," the letter said, with the COAI seeking a two-year moratorium on payments for airwave spectrum from 2020 to 2022.

India's crowded telecoms sector once had more than a dozen mobile operators but consolidation has resulted in only three private players - Bharti, Vodafone and Jio - and two other debt-ridden state companies.

Reliance Industries-owned RELI.NS Jio began operations in late 2016 and is least affected by the ruling because it has only $2 million in charges to clear.

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(Reporting by Aditya Kalra and Sankalp Phartiyal Editing by David Goodman)

((sankalp.phartiyal@thomsonreuters.com; +91-11-49548064;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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