India's government ordered mobile carriers on Friday to "immediately" pay billions of dollars in dues after its Supreme Court threatened the companies and officials with contempt proceedings for failing to abide by an earlier ruling.
"We will draw up contempt [charges] against everyone," Justice Arun Mishra warned, implying that both company and government officials could be fined or jailed if the dues are not paid by March 17.
India's Supreme Court had initially ordered companies including Vodafone Idea Ltd and Bharti Airtel Ltd to pay 920 billion Indian rupees ($13bn) in overdue levies and interest by January 23. On Friday it also rejected petitions seeking a review of the order it had issued back in October. The telecom companies had contested the government's definition of revenues subject to tax.
Justice Mishra rebuked the government for having failed to implement the court order. "This is pure contempt, 100 percent contempt," the judge told lawyers for the companies and the government.
Later in the day, India's Department of Telecommunications called for "immediate payments" from the telecoms. Another order instructed related offices to stay open on Saturday to allow telecom licensees to make payments or contact them with any matter relevant to that goal.
Shares in Vodafone Idea, in which the United Kingdom's Vodafone Group owns a sizable stake, closed down 24.4 percent after the order was issued. Vodafone Idea, which owes the Indian government about $4bn in dues related to the ruling, has seen its shares tumble more than 40 percent since the October ruling. The company has already said that it has no plans to commit any more equity into India.
Bharti Airtel Ltd and Reliance Jio Infocomm Ltd now have the opportunity to win market share and enjoy an effective duopoly in the telecom sector. Shares in Bharti Airtel rose 4.64 percent on Friday as it pledged to pay its 100 billion rupees ($1.4bn) balance "well before" the March deadline. Reliance Jio, backed by Asia's richest man, Mukesh Ambani, controls more than 90 percent of India's mobile market. It has already paid its dues.
Analysts worry that the court's move could harm both India's government and the companies. Indian banks are burdened with nearly $140bn of bad loans and face another huge hurdle if Vodafone Idea is forced into bankruptcy.
"It can't be in anybody's interest if a company as high profile as Vodafone Idea shuts shop," said Mahesh Uppal, director at ComFirst, a telecom consultancy firm.
The broader Indian stock market also reversed early gains to trade lower after the ruling as investors worried about the fallout.