Kumar Mangalam Birla has written to India’s cabinet secretary, Rajiv Gauba, saying he is willing to hand over the stake to “any entity – public sector/government/domestic financial entity, or any other that the government may consider worthy of keeping the company as a going concern”.
He said that if no action is taken on key matters, including back taxes due to the government, Vodafone Idea will be at an “irretrievable point of collapse”.
Birla said in the letter that he is directed by a “sense of duty” to the 270 million people who use Vodafone Idea, which was rebranded Vi in September 2020 after the merger that was completed two years before.
The company announced in September that its existing brands, Vodafone and Idea, would become Vi – pronounced “we” – and that its motto would be “Together for Tomorrow”.
Vi is now one of the three major Indian mobile operators with significant market share, alongside Bharti Airtel and Reliance Jio, following a series of mergers after Jio entered the market five years ago with a modern, 4G-only network offered at low prices.
That set the rest of the industry in India into a fever of mergers, acquisitions and bankruptcies.
Birla chairs the boards of all the Aditya Birla group’s companies, including operations in chemicals, minerals and cellulose. He also chairs Vodafone Idea. The whole Aditya Birla group has a turnover of US$46 billion.
But Vi still faces a bill of $6.1 billion in dues to the Indian government, following a recalculation by the Department of Telecom (DoT) for the taxes on the basis of adjusted gross revenue (AGR). Bharti Airtel owes $4.7 billion.
Last year the Supreme Court of India gave Vi and Airtel 10 years to pay, with the first 10% instalment due in March 2021.
Vi said last year, after the merger was complete, that it plans to raise up to $2 billion in equity and more – up to a total of $3.4 billion – in debt, but in a damning comment Fitch Ratings said this “is unlikely to restore its competitive position and reverse subscriber losses, because the amount would not be sufficient for capex”.
Birla said in the letter that the AGR liability threatened the government’s declared for the market.
“Potential foreign investors … want to see clear government intent to have a three player telecom market (consistent with its public stance) through positive actions on long-standing requests such as clarity on AGR liability; adequate moratorium on spectrum payments and most importantly, a floor price regime above the cost of service,” he wrote.
Birla warned: “Without immediate active support from the government on these three issues (certainly by July 2021), VIL’s financial situation will drive its operations to an irretrievable point of collapse.”
