Vodafone Idea on the brink of closure after $4bn charges

Vodafone Idea on the brink of closure after $4bn charges

06 December 2019 | Natalie Bannerman

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Vodafone Idea may face closure following India’s Supreme Court ruling forcing the joint venture to pay $4 billion.

According to the Financial Times, Kumar Mangalam Birla, owner of Idea Cellular, one half of Vodafone Idea, has said that the company may have to close if New Delhi does not intervene and stop the billon-dollar charge.

“I think that’s the end of the story for Vodafone Idea,” she said to the FT. “It doesn’t make sense to put good money after bad. So that would be the end of the story for us. We’d shut shop.” 

The ruling comes a part of a series of retrospective levies, penalties and interest owed by the company and due in a matter of three months.

Though Birla is holding out hope saying that he has “every reason to believe it won’t happen” and expecting some kind of help from the government. “But at the same time . . . it is true that we would shut shop if we don’t get relief. There is no company in the world that can pay that kind of fine in three months.”

Last month, Vodafone CEO Nick Read hinted at potential liquidation of the business during a post FY19 results briefing.

"If you don't get the remedies being suggested, the situation the situation is critical. If you're not a going concern, you're moving into a liquidation scenario -- can't get any clearer than that."

The Indian telecoms has been in a state of turmoil as of late with competitor Bharti Airtel dealing with a $3 billion fine of its own. Additionally, with the entry of newcomer, Mukesh Ambani owned, Reliance Jio, both Vodafone Idea and Bharti Aritel have seen its market shares dramatically decrease thanks to Reliance Jio’s  low cut-price contracts that have driven India’s data prices to the lowest in the world. Vodafone Idea has also been losing many of its customers that migrating to Reliance Jio.