Vodafone Idea falls on Birla’s departure

Billionaire stepped down as non-executive chairman adding to investor concerns over telco’s troubles

Vodafone Idea’s shares fell to their lowest level in over a year on Thursday, a day after its billionaire non-executive chairman stepped down, fuelling concerns that the Indian wireless carrier may not survive a hefty bill it owes to the government.

The company owes about ₹500 billion over the next 10 years for use of the airwaves and in licence fees. India’s Supreme Court has not allowed any recalculation of those dues.

Slump as much as 24%

Vodafone Idea’s shares fell as much as 24% before recovering to close 1.49% lower at ₹5.94 on the BSE.

In June, Kumar Mangalam Birla, the former non-executive chairman of Vodafone Idea, whose resignation was accepted by the company’s board on Wednesday, offered to sell his Aditya Birla Group’s 27% stake in the telecoms carrier to keep it afloat.

Vodafone Idea was formed in 2018 by combining the Indian operations of Vodafone Group and Idea Cellular, which is majority owned by the Aditya Birla Group.

In his June 7 letter to the government, Mr. Birla had suggested measures to save the company, including clarity on dues Vodafone Idea owed, a moratorium on airwaves payments and a floor price for tariffs.

“I want to emphasise that without immediate active support from the government on these three issues VIL’s (Vodafone India Ltd.’s) financial situation will drive its operations to an irretrievable point of collapse,” Mr. Birla wrote in his letter.

‘Expressing frustration’

The government is yet to offer any help to the company. India’s Department of Telecommunicatons did not immediately respond to a request for comment.

Vodafone Idea declined on Mr. Birla’s departure, and representatives at Aditya Birla Group did not respond to an e-mail from Reuters.

“This is Birla expressing his frustration at the way his pleas for help have been ignored, saying he does not want to helm the demise of a company he created,” said a former executive at the company.

‘Biggest loser’

With roughly 10,000 direct employees and loans from banks of almost ₹300 billion, Vodafone Idea’s potential exit would send shock waves through India’s economy.

“In case Vodafone goes under, the biggest loser in this will be the government, because a major chunk of the debt is owed to them,” said a senior banker at a private bank which has lent money to Vodafone Idea. “So, the ball is now in their court,” the banker added.

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