India’s Supreme Court on Thursday ordered phone operators in the country to pay the government a combined US$13 billion in past airwave and license fees.
The ruling came after a two-decades-old legal dispute between authorities and the companies over the payments.
In a market already bruised by a price war since Jio’s 2016 entry with free calls and cheap data, the biggest loser from the court order is Jio’s closest rival, Vodafone Group Plc’s local venture.
The UK-based operator and its Indian partner now need to pay US$4 billion, a huge burden for a carrier that hasn’t reported operating profit since 2017.
Bharti Airtel Ltd, the No 3 carrier, faces a bill of $3 billion, compared with Jio’s US$1.8 million, an amount reflecting the fact that Ambani’s operator has only been in business for three years.
In that span, Jio’s price-slashing has dragged down competitors and prompted more borrowing just to stay in the game.
Bharti Airtel and Vodafone Idea Ltd have racked up a combined net debt of almost US$28 billion and face the prospect of billions of dollars more in spending on introducing 5G networks.
Bharti Airtel, controlled by tycoon Sunil Mittal, reported its first ever loss in the quarter through June.
“In case of full payment, Vodafone Idea will have no cash for capex or spectrum installments for next three years,” Jefferies said in a research note. “For Bharti, it will mean curtailing of capex. We await more clarity on amount and terms of payment.”
Vodafone Idea has shed about US$931 million in market value in the past four trading days in Mumbai as its stock plunged by more than a third.
The shares slid as much as 16% Friday to a record low, following a 23% drop on Thursday. Airtel was down 2% as of 1:06 p.m. in Mumbai trading.
Deep pockets
Backed by the deep pockets of Ambani’s Reliance Industries Ltd oil-to-retail conglomerate, Jio has spent US$50 billion to build its nationwide network and had a debt of 840 billion rupees.
The carrier reported quarterly profits this fiscal year after luring users away from Airtel and Vodafone. Reliance shares slipped 0.5% after rallying 3.2% on Thursday.
Still, the court decision means Jio will face some pressure on earnings, because the ruling endorsed the way the government measures revenue as regards license and spectrum fees, according to Bloomberg Intelligence.