India’s Top Court Rules Phone Carriers Must Pay $13 Billion to Government

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India’s Supreme Court ruled that wireless carriers including Bharti Airtel Ltd. and Vodafone Idea Ltd. need to pay $13 billion of dues to the government, rejecting an appeal by operators struggling to stem losses and reduce debt.

A three-judge Supreme Court bench headed by Justice Arun Mishra on Thursday dismissed review petitions filed by the telecommunication companies against the October verdict, according to updates on the court’s website. Under that ruling, Vodafone Group Plc’s India venture has to pay $4 billion, while Bharti Airtel got a $3 billion bill -- all due on Jan. 24.

The court also rejected requests by telecom companies for rehearing the petition seeking relaxations on penalties sought by the government and deadline for the payment.

The court’s rebuff is the latest setback for the survivors of a brutal tariff war sparked by the 2016 entry of billionaire Mukesh Ambani’s Reliance Jio Infocomm Ltd., an upstart that disrupted the industry with free calls and cheap data. Both Bharti Airtel and Vodafone Idea, with a combined net debt of about $30 billion, reported record losses in the quarter through September, and were counting on the court to reverse its order.

“We wonder how weaker operators like Vodafone Idea will make this payment, and not that Bharti Airtel is getting any respite as the amount has to be paid up,” said Gaurang Shah, vice president at Geojit Financial Services Ltd. “It isn’t easy to raise tariffs and retain customers. It remains to be seen how companies now respond to this decision because the court has twice spelled it out for them.”

Eroding Viability

For two decades, the operators had challenged the way authorities calculated their annual adjusted gross revenue, a share of which is paid as license and spectrum fees. With the October ruling, the court upheld the government’s method, while rejecting the companies’ plea to exclude revenue from non-telecommunications businesses.

“We are evaluating filing a curative petition,” Airtel said in a statement after the ruling. “The industry continues to face severe financial stress and the outcome could further erode the viability of the sector as a whole.”

The government had raised a total demand of around 920 billion rupees ($13 billion) against all telecom operators, including defunct ones, according to filings in the court.

Here’s a list of companies and the amount they have to pay to the government:

Bharti Airtel recently raised $3 billion from sales of shares and convertible bonds to help meet the payment deadline. On the other hand, Vodafone Idea’s billionaire Chairman Kumar Mangalam Birla warned last month that the company would have to cease operations and head for insolvency if the government doesn’t provide relief measures.

Last year, Vodafone Idea had raised 250 billion rupees from a rights issue.

Vodafone’s India Unit Chairman Says End is Near If No Support

“Vodafone may have some cash through rights issue but it won’t be enough to meet the overall dues,” said Rajiv Sharma, an analyst at Sbicap Securities. “If there’s not enough relief, then it is going to be a matter of time before they shut down.”

In the past decade, India has seen a consolidation in the telecommunications industry. Three non-state operators are left now, from about a dozen four years ago. While Vodafone’s local unit announced its merger with Birla’s Idea Cellular Ltd. in 2017, Aircel Ltd. and tycoon Anil Ambani’s Reliance Communications Ltd. slipped into bankruptcy last year. Others including Norway’s Telenor group and UAE’s Etisalat group exited the market.

(Updates with background throughout.)

--With assistance from P R Sanjai and Nupur Acharya.

To contact the reporters on this story: Upmanyu Trivedi in New Delhi at utrivedi2@bloomberg.net;Ragini Saxena in Mumbai at rsaxena30@bloomberg.net

To contact the editors responsible for this story: Sam Nagarajan at samnagarajan@bloomberg.net, ;Unni Krishnan at ukrishnan2@bloomberg.net, Bhuma Shrivastava

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