NEW DELHI: A collapse of a giant like Vodafone Idea from the crucial telecom space may prove to be “very risky” for the country, said State Bank of India Chief Financial Officer Prashant Kumar.
“I think it would be very risky for the country. If you see, the immediate concern for the current telcos is the large customer base...If any company closes down the operations , so such a large customer base has to be taken care of by the other players. It is a huge challenge,” SBI CFO Prashant Kumar told ETCFO in an exclusive interview.
His comments assume significance in the backdrop of Friday’s Supreme Court ruling, which pulled up telcos for failing to comply with the October 24 order last year. The apex court had directed telcos to pay their adjusted gross revenue or AGR related dues to the government. The Supreme Court Friday’s puts a big question mark on the future of cash-strapped Vodafone Idea, which has pay-out obligations of more than Rs 53,000 crore.
“The Company is currently assessing the amount that it will be able to pay to DoT towards the dues calculated based on AGR (Adjusted Gross Revenue), as interpreted by the Hon'ble Supreme Court in its order dated 24 October 2019. The Company proposes to pay the amount so assessed in the next few days,” Vodafone Idea said in a statement Saturday.
There have been repeated calls for the shutdown of Voda Idea in recent months in the absence of any regulatory support. Last year in November, Vodafone PLC CEO Nick Read had indicated its India venture Vodafone Idea could see a shutdown. "If you don't get the remedies being suggested, the situation is critical....f you are not a going concern, you are moving into a liquidation scenario," Read said. Aditya Birla Group chairman Kumar Mangalam Birla too warned that the group's telecom unit might have to close the shop if government support isn’t provided.
“For such a large country (like India), we need to have 4-5 strong players. In the current scenario, we need to have a very strong telecom network, telecom service provider. Otherwise, you can’t compete in the world itself,” SBI CFO Prashant Kumar emphasized.
Friday's Supreme Court ruling is also going to be a matter of concern for the lenders, as they have significant exposure to the stressed telecom space. Banks are already coping with the large NPAs on their books. And the ongoing stress in the telecommunications sector indicates further pain. Hence, the lenders such as Yes Bank, SBI, Axis Bank, may have to make higher provisions in the coming quarters in case the asset turns bad.
“…As of now, there are certain issues, and I think once those issues are clear, then this is one industry where we will see better growth. Such a large country (like India) can’t exist without telecom,” concluded SBI finance Chief Prashant Kumar.
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