As per the reports, the U.S. satellite broadband provider Hughes Network Systems may have to shut its Indian operations due to unpaid levies owed to the government, which could put thousands of banking services at risk.
How Did This Happen?
At the end of last year, India’s Supreme Court ordered a number of telecom companies, including Hughes and larger firms like Vodafone (VOD.L), to pay billions of dollars owed to the government.
Basically, Hughes’ India unit provides services to defense, education and banking sectors in the country.
The company told India’s telecoms minister in a letter dated 2o, february that it faces bankruptcy as it can’t pay the 6 billion rupees ($84 million) it owes.
Unfortunately, the closure of the company could disrupt connectivity at more than 70,000 banking locations and many critical satellite networks in the Indian navy, army and railways, Hughes’ India President Partho Banerjee said in the letter.
Why Would This Happen?
Banerjee wrote “We are facing a huge demand … which by no means is serviceable by us and is in fact pushing our company towards bankruptcy & closure. This is an SOS request,”.
According to the company, the government’s telecoms department had made an incorrect calculation of the dues more than a decade ago which has ballooned to $84 million with interest and penalties.
While Hughes did not comment on the substance of the letter but said in a statement it “remains committed to India” and would continue to provide services to its customers.
Also, India’s telecom ministry did not respond to a request for comment.
How Will This Affect?
Not only that, Vodafone Idea, which owes $3.9 billion in dues, interest and penalties, has already warned of a potential exit, putting at risk 13,000 employees and billions of dollars in bank loans.
Also, India’s claim for unpaid dues followed a dispute with companies over how adjusted gross revenue, a percentage of which companies need to pay to the government as fee, was calculated.
Although, the $84 million Hughes owes is significantly smaller than the sums owed by larger peers, a company document from December showed it was still more than three times its net worth in India.
The company said “This, if not resolved, will make the operation unviable thus rendering many customers like banks, other enterprises and critical government networks without any connectivity,” in a separate December letter to the government.
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