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Will Telecom giants survive this catastrophe?

CA Tushar Gupta
CA Tushar Gupta

SC Judgement

The markets are at all time high but some concerns have emerged after the Supreme Court’s judgment on telecom liabilities. Telecom companies Bharti Airtel and Vodafone Idea have to pay up dues they owe to the government, the apex court said dismissing their review petition and upholding its own earlier judgment.

Bharti Airtel will have to pay INR 35,586 crore and Vodafone Idea INR 50,000 crore. News reports say they might file a curative petition, but it’s unlikely the Supreme Court will accept such a plea. The stock price of Vodafone-Idea, which had earlier said it might have to shut down operations if it had to pay these dues, had fallen sharply. While Bharti Airtel’s stock is up on the belief it will gain market share if Vodafone Idea shuts down

Impact On Bonds

Given the nature of these companies balance sheets, banks which have lent to them also saw their stock prices fall due to the fear of defaults by these companies.  Among these lenders, Yes Bank and SBI saw most decline in their stock prices.

Two Player Market

The supreme court’s decision is a big shock for Vodafone Idea, the chairman has already said that they would shut down the operations if they don’t get any relief from the government.

 

Bharti Airtel has recently raised massive funds from qualified institutional placement (QIP) and Foreign currency convertible bonds (FCCB) to repay the government dues.

This suggests that India will have only two-player market in future consisting of Airtel & Jio.

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