India weighs resolution of Vodafone Idea dues row to bolster UK ties

The government, which became Vodafone Idea’s 49% shareholder this year through a debt-to-equity swap, has publicly acknowledged the need for a solution. Bloomberg

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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 Rs 2 trillion ($22.5 billion) financial dispute may come through a waiver of interest and penalties, followed by a concession on the principal, said the people, who asked not to be identified as the discussions are private. 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, they said.

The arrears have hung over Vodafone Idea Ltd., which hasn’t reported a quarterly profit since 2016. A settlement would potentially pave the way for India’s third-largest wireless carrier to attract new investors, the people added.

Vodafone Idea was formed by the merger of the British firm’s local unit with billionaire Kumar Mangalam Birla’s Idea Cellular Ltd. Reviving it would help preserve competition in the country’s telecom market and deliver far greater returns for India diplomatically by anchoring the UK more firmly as a partner.

Deepening ties between the UK and India, which recently signed a free trade agreement, will particularly benefit New Delhi at a time relations with the US have soured after President Donald Trump’s return to the White House. Also, efforts to reset ties with neighboring China are only just beginning — making the case for prioritizing relations that are already thriving.

British Prime Minister Keir Starmer is scheduled to visit India this week, adding urgency to the effort, one of the people said.

A representative for Vodafone Idea and telecom ministry did not respond to an email seeking comments on the resolution proposal.

The 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 October 6.