India Weighs Resolution Of Vodafone Dues Row To Bolster UK Ties
A deal would throw a lifeline to India’s third-largest wireless operator, shore up competition in a sector dominated by Reliance Jio Infocomm Ltd.
India is considering a one-time settlement of its longstanding demand for billions of dollars in past-due fees from Vodafone Group Plc’s beleaguered local venture, as the government seeks to strengthen ties with the UK, people familiar with the matter said.
Resolution in the nearly 2 trillion rupees ($22.5 billion) financial dispute may come through a waiver of interest and penalties, followed by a concession on the principal for Vodafone Idea Ltd., said the people, who asked not to be identified as the discussions are private.
A deal would throw a lifeline to India’s third-largest wireless operator, shore up competition in a sector dominated by Reliance Jio Infocomm Ltd. as well as signal to global investors that New Delhi wants to remedy its reputation for unpredictable policy measures.
It’s also a calculated diplomatic gesture toward the UK soon after the two countries inked a trade pact and just as Prime Minister Keir Starmer prepares to visit India this week. With US ties fraying under President Donald Trump and relations with China just beginning to warm, India may use any settlement with Vodafone Idea to anchor the UK as a more dependable economic partner and show that it can be pragmatic when strategic interests demand.
Indian officials are drafting the framework and also weighing steps to ensure any deal doesn’t spark legal challenges from other telecom operators that owe dues, the people said.
Attract Investors
The arrears have hung over the joint venture formed by the merger of the British firm’s local unit with billionaire Kumar Mangalam Birla’s Idea Cellular Ltd. It hasn’t reported a quarterly profit since 2016. A settlement would potentially pave the way for the wireless carrier to attract new investors, the people added.
Starmer’s scheduled visit has added urgency to the effort, one of the people said.
A representative for Vodafone Idea and India’s telecom ministry did not respond to an email seeking comments on the resolution proposal.
The Indian government, which became Vodafone Idea’s 49% shareholder this year through a debt-to-equity swap, has publicly acknowledged the need for a solution. A government counsel told the Supreme Court last month that “some solution may be required” given public funds are now tied up in the carrier.
The dispute itself pertains to how India calculates annual adjusted gross revenue (AGR), a share of which is paid as license and spectrum fees. While telecom carriers have challenged the method for years, the court may be more receptive this time if the government shifts its stance, one of the people said.
No Unfair Advantage
To be sure, officials will have to ensure that all telecom operators are treated fairly in the process of granting AGR relief — Sunil Mittal’s Bharti Airtel Ltd. and the Tata Group’s wireless carrier have also been seeking relief. One option under discussion is to seek revival plans from all operators in exchange for any concession, ensuring that Vodafone Idea isn’t given an unfair advantage over peers.
Vodafone Idea has been in urgent need of capital infusion and any potential deal with a new partner hinges on clarity around the AGR burden, the people said.
If New Delhi proceeds with a solution, it would mark the most significant intervention yet in India’s telecom sector since the government stepped in to take a near-majority stake in Vodafone Idea.
The country’s top court will hear Vodafone’s petition challenging the government’s calculation of its AGR dues Oct. 6.
