The loss-making firm Vodafone Idea (VODA.NS) experienced a good start to the week, as its shares increased as much as 12%. This happened after the media said the perturbed Indian telecom operator is going to pay some of its overwhelming government dues of $3.9 billion on Monday, to avert violating court orders.
The burden of Dues
On Friday, India made an order of mobile carriers to quickly pay about $13 billion in dues after the Supreme Court warned the officials and companies with contempt for failing to implement a previous ruling.
On Saturday, the local arm of British telecom giant Vodafone Plc (VOD.L) said it prospected in making a payment in the coming few days.
The shares of the company, which decreased by more than 24% percent following Friday’s ruling, recovered on Monday to trade up 15% by mid-morning.
“While there is a concern that Vodafone is against the wall, there is a slim hope that they will get through,” said Siddhartha Khemka, head of research at Motilal Oswal Financial Services in Mumbai.
“The Supreme Court’s major contention was that there was no intent by telcos to pay the dues,” he added. “It was after that the company made a self-assessment and made an announcement on Saturday and we had the reports later.”
Depending on the Supreme Court’s Verdict
The media stated here Vodafone Idea is going to pay off some part of the dues owed in spectrum fees and licensing on Monday.
The company and the Department of Telecommunications (DoT) did not promptly answer emails seeking comment regarding the situation.
On Monday, its rival company Bharti Airtel Ltd (BRTI.NS) stated it had deposited a payment of 100 billion rupees toward the dues.
If Vodafone Idea shut down its shop, the market in India will transform into a duopoly of rivals Airtel and Reliance Jio, which many executives and analysts believe is bad for the industry.
Vodafone Idea has stated before that its condition to exist as a profitable business was dependent on the Supreme Court permitting it to discuss issues such as payment timelines with the government.
“Given the government’s keenness on maintaining three private telcos, we believe the Department of Telecommunications or the government will request the Supreme Court to negotiate AGR payments with telcos,” said analyst Vivekanand Subbaraman of research firm Ambit Capital.
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