US-based satellite broadband provider Hughes Network System may have to shut its Indian operations due to unpaid dues owed to the government. According to Reuters, this development could put thousands of banking services at risk.
Recently, the Supreme Court of India had ordered a number of telecom companies, including Hughes and larger firms like Vodafone, to pay billions of dollars owed to the government.
Hughes provides services to defense, education and banking sectors in the country. According to a company letter accessed by news agency Reuters, the company told India’s telecoms minister in a letter dated Feb. 20 that it faces bankruptcy as it can’t pay the ₹600 crore ($84 million) it owes.
According to Reuters, if the company closes down its operations, it 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.
Banerjee wrote in the letter, “We are facing a huge demand … which by no means is serviceable by us and is in fact pushing our company towards bankruptcy & closure.”
The letter added, “This is an SOS request.”
The company claims that 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.
When the news agency approached Hughes for a comment, the company declined to cite that it “remains committed to India” and would continue to provide services to its customers.
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. If Hughes closes down its operations, then it will bring trouble for the Narendra Modi-led government, which is already facing tough criticism from business leaders and opposition for failing to scale up India’s growth and put a stop at job losses in the country.
Unemployment in India stood at 7.48% in December 2019, a 1% decline compared to a three-year high of 8.45% in October 2019.
While 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.
In a separate letter to the government in December last year, 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.”
According to the company website, Hughes, which is part of the US-based satellite group Echostar Corp, in December 2018 announced that it has been chosen to provide a high-performance satellite broadband system for India’s Naval communications network. The company also provides communication services to more than 30 public and private banks in India.
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