The uptake in cellular service in India the last couple of years has been inspiring. The entrance of Reliance Jio into the Indian market in 2016 with its affordable LTE service has brought mobile internet to millions of consumers in the country. But now, the Indian government is demanding that the country's carriers, including Bharti Airtel and Vodafone Idea, pay the government about $13 billion in past fees related to spectrum licenses, according to Bloomberg.
The $4 billion charge levied on Vodafone Idea could sink the company, according to a second Bloomberg report. The bill is roughly equivalent to Vodafone Idea’s 2018 full year revenues. Bharti Airtel is stuck with a bill of approximately $3 billion.
The fees stem from a decades-long lawsuit between the carriers and the government to determine how the companies’ spectrum licenses should be calculated. Unfortunately, the drawn-out legal battle resulted in an unfavorable ruling against the carriers, and now they must pay all the back fees that had accumulated during the legal fight in addition to accrued penalties. India’s upstart mobile carrier Jio is least impacted by the judgment; Jio only needs to pay $1.8 million.
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Jio has built a greenfield mobile LTE network from the ground up. The operator is primed and ready for 5G as soon as India holds its 5G spectrum auction in the first half of 2020.
But for the other two carriers, the fees levied by the government couldn’t come at a worse time. They’ve both struggled to maintain their profitability since the entrance of Jio, which has grabbed market share with its free calls and cheap data. Bharti Airtel and Vodafone Idea already owe a combined net debt of almost $28 billion.
So far, the Indian government appears unsympathetic to that fact that its fees could actually drive one or more major carriers out of business. The stocks of both companies have plummeted upon news of the government fees.
A note from New Street Research said, "We would expect Vodafone Idea to fail to raise the required capital in time, and a two-player market in under a year therefore. Bharti Airtel benefits either if the payment is reduced or if it isn’t (and the market ends up with two players)."