Vodafone Idea gets show cause notice for non-payment of licence fee

show cause Vodafone Idea
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India’s Department of Telecommunications (DoT) has issued a show cause notice to Vodafone Idea for non-payment of licence fee for the last quarter of the recently concluded financial year.

The development reflects the telecom operator’s financial situation and delays in raising funds to clear statutory dues and fund network expansion in the country.

Vodafone Idea, the only loss-making private telecom operator, has not paid the licence fee for seven circles: Bihar, Gujarat, Jammu & Kashmir, Kerala Maharashtra, Uttar Pradesh (East) and Orissa, as per the DoT’s April 7 notice.

The telco hasn’t paid fee for national long distance licences, the department said in its show-cause notice.

The cash-strapped telecom operator is now planning to respond to the department’s notice and will also clear dues before April 15, as per media reports.

As per the notice, the payment was due on March 25, and the department has asked, “why action should not be taken against the telco for violating licence conditions by not paying dues on time.” It has asked the telco to respond to its notice by April 12.

As per clauses of the Unified License Agreement (ULA) and equivalent clauses of other license agreement, “…for the last quarter of the financial year, the Licensee shall pay the License Fee by 25th March based on expected revenue for the quarter, subject to a minimum payment equal to the revenue share paid for the previous quarter.”

The licence fee must be paid in four quarterly instalments during the financial year, as per the Unified Licence Agreement.

Notably, the department can invoke the telco’s bank guarantees and cancel its licence for flouting licence conditions under the licensing conditions.

The telco had paid Rs 1,367 crore  ($184.73 million) as licence fee and spectrum usage charges for the same quarter of the previous year (FY20). It had reportedly paid Rs 1,200 crore ($162.16 million) for the first quarter of FY21.

The telecom operator is currently in talks with various private equity firms to raise $2-2.5 billion.

The telco recently raised prices of postpaid plans to strengthen its financials. However, it hasn’t been able to increase tariffs for prepaid services due to competitive pressure in the market.

The telco lost 2.3 million wireless users in January, while rivals Bharti Airtel and Reliance Jio Infocomm gained 5.9 million and 2 million users, respectively. Reliance Jio led the market in January with 410.7 million wireless subscribers, followed by Airtel’s 344.6 million and Vodafone Idea’s 281.9 million, as per telecom regulator’s data.

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