Hughes threatens bankruptcy amid Indian telco dispute

Hughes threatens bankruptcy amid Indian telco dispute

26 February 2020 | Natalie Bannerman

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Hughes Network Systems has said that it may have to close its Indian operations due to unpaid fees owed to the government.

The US satellite operator is facing similar troubles to that of the country’s mobile operators, which at the start of the year, after losing its case in India’s Supreme Court, was told it owes $14 billion in dues.

Since then, the operators have agreed to make part-payment as they have threatened to close down if the government demands the full sum.

The whole episode began because the Supreme Court of India changed the way telcos calculate their spectrum usage charges – defined by a metric called adjusted gross revenue (AGR).  Leaving operators and those that are regarded as telcos left with extra debt.

For Hughes’ part, it owes $84 million (Rs 600 crore) which it has told the government’s Department of Telecom (DoT) that will force it into bankruptcy. Hughes Indian unit delivers satellite broadband services to the country’s defence, education and banking sectors.

If the company does end up filing for bankruptcy, it could disrupt connectivity at more than 70,000 locations as well as many critical satellite networks in the Indian navy, army and the country’s railways, said to Partho Banerjee, president of Hughes India.

According to a letter seen by Reuters and sent to the DoT earlier this month, Banerjee wrote: “We are facing a huge demand ... which by no means is serviceable by us and is in fact pushing our company towards bankruptcy & closure. “This is an SOS request.”

Banerjee went on to claim that the DoT made an incorrect calculation of its dues over 10 years ago.

The news was also reinforced in EchoStar’s, Hughes’ parent company, FY19 results filing. In the document the company stated:

“As a result of the Supreme Court’s decisions and based on the DoT’s current methodology for assessing penalties and interest, we booked an additional accrual of $60.8 million during the quarter which also impacted Net income (loss) attributable to non-controlling interest.”