Vodafone’s likely exit will cast India in negative light: Kevin McCole

The UK India Business Council (UKIBC) has urged the Centre to address concerns around the telecom sector because an exit by British major Vodafone could be harmful to the country’s image as an investment destination.

Kevin McCole, MD of UKIBC, told BusinessLine that the distress in the Indian telecom sector will not only impact the UK-headquartered Vodafone but also the other players in the sector.

“If a company like Vodafone was struggling, it would draw attention towards the Indian market in a bad way. It draws attention to the under movements and investors try to figure out the reason behind the whole issue and the disruption, which isn’t good,” he added.

When asked if it could hamper the UK-India relations, McCole said that it won’t impact the relations between the two countries.

“It affects international investor perception of India as a market. It (India) comes across as a challenge,” McCole explained.

The UKIBC recently released a report on ease of doing business from the UK perspective, wherein 56 per cent of the respondents stated that doing business in India was getting easier. Twenty-one per cent said that it had not improved.

McCole said that a pressing and recurring issue that they had repeatedly seen in India was the complex taxation system, along with hurdles in the legal and regulatory framework. With the telecom crisis and UK’s telecom giant stuck in it, “a perception that India is a difficult place to do business becomes firmer.”

‘Time for a solution’

The CEO has urged Indian telecom players and the regulatory authorities to find a solution to the issues.

Vodafone Idea posted its biggest quarterly consolidated net loss of ₹50,921.9 crore for the second quarter ended September 30, impacted mainly by adjusted gross revenues (AGR) provisions. Vodafone Idea has provisioned ₹25,677.9 crore for AGR payments, which is estimated at ₹44,150 crore.

The telecom operator has filed a review petition in the Supreme Court seeking a waiver of the interest and penalty amounts.

“Vodafone, other players in the telecom industry and the regulatory authority need to find a way to address this issue,” McCole said.

Telecom was known as the poster boy of India’s liberalisation about two decades ago but is now facing a crisis due to an uncertain policy environment.

Vodafone Idea’s financial position is so precarious that it will be forced to shut operations if the Centre does not offer a fiscal package for the telecom sector.

Speaking at a media event in New Delhi, Kumar Mangalam Birla, Chairman, Vodafone Idea, said: “I think we can expect much more stimulus from the government because it is required for the sector to survive. If we weren’t getting anything, then I think, it is the end of the story for Vodafone Idea.”

‘Need more than 2 players’

“India’s telecom sector has been very fast growing, dynamic and vibrant and that’s good for the consumers because competition and choice are good for the market,” the UKIBC chief said.

“India needs more than two players. A monopoly or duopoly cannot sustain the industry,” McCole added. “Vodafone is one of the biggest foreign investors in India. The distress in the telecom sector in India is not only impacting Vodafone but other players in the sector.”