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Dismissal Of Plea On Re-Computation Of AGR Dues Body Blow For Debt-Laden VIL, Say Analysts

The Supreme Court on Friday dismissed the applications filed by telecom majors, including Vodafone Idea and Bharti Airtel, seeking rectification of the alleged errors in the calculation of adjusted gross revenue (AGR) related dues payable by them.

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The dismissal of telcos' plea by the Supreme Court on re-computation of AGR-related dues may deal a body blow to the troubled Vodafone Idea, whose balance sheet situation is 'precarious', analysts said on Friday.

Vodafone Idea (VIL) would be the 'most adversely impacted' by the latest development, followed by Indus Towers (indirectly) while Bharti Airtel remains relatively better placed, Citi said in its note.

Edelweiss, in its report, wondered if a telco duopoly is 'on the cards', in absence of VIL's capital-raising and tariff hike.

'The dismissal of the plea by the Supreme Court is a material setback for the company, in our view. VI has been seeking to raise Rs 250bn (Rs 25,000 crore) of capital, for which it had taken board approval in Sep’20. With no AGR recomputation relief and inability to raise tariffs (thus far), the capital raise becomes incrementally more challenging,' Citi said.

The Supreme Court on Friday dismissed the applications filed by telecom majors, including Vodafone Idea and Bharti Airtel, seeking rectification of the alleged errors in the calculation of adjusted gross revenue (AGR) related dues payable by them.

The telecom companies had submitted before the apex court that arithmetical errors in the calculation be rectified and there are cases of duplication of entries.

“All the miscellaneous applications are dismissed,” a bench headed by Justice L Nageswara Rao said while pronouncing the order.

In its report, Citi observed that Voda Idea's situation 'remains challenging', and added any relief could have been a material positive for companies, especially Voda Idea.

'VI would be most adversely impacted by the latest development, followed by Indus Towers (indirectly) while Bharti Airtel remains relatively better placed,' it said.

It estimated that VIL has about Rs 24,000 crore of payments coming up by April 22, including existing debt repayment of Rs 8,000 crore, spectrum payment installment of Rs 8,200 crore, annual AGR payment of Rs 8,000 crore.

That implies network investments may not pick up even after such a capital raise, unless there is further relief from the government on payment timelines, that is, extension of moratorium on spectrum payment or unlikely event of any legislative action to extend AGR timelines, or on tariffs (either by facilitating tariff hike similar to December 2019 or with the regulator implementing floor tariffs), the report said.

Meanwhile, Edelweiss in a note said that any relief in AGR dues would have abated VIL's debt woes and facilitated much-needed fund-raising.

'In absence of VI’s capital-raising and tariff hike, we see the market moving towards a duopoly,' it added.

The AGR dues for Bharti Airtel (Bharti) and Vodafone Idea (VI) will stay at Rs 44,000 crore and Rs 58,300 crore, respectively. The telcos’ own calculations were Rs 13,000 crore and Rs 21,500 crore, respectively, it observed.

Minister of State for Communications Devusinh Chauhan had informed Rajya Sabha on Thursday that while the total AGR dues of various telecom companies (private and state-owned) aggregated to Rs 1,69,048.65 crore, payment totalling Rs 30,283.59 crore has been received till date, and nearly Rs 1,38,765 crore is outstanding payable.

In case of VIL, against the total dues of Rs 58,254 crore, total payment received till date stands at Rs 7,854.37 crore, while the outstanding payable stands at Rs 50,399.63 crore.

For Bharti Airtel Group, whose overall dues stood at Rs 43,980 crore, payment of Rs 18,004 crore has been received to date and Rs 25,976 crore is outstanding payable.

The Supreme Court last year had said that telcos would be required to make the payment of 10 per cent of the total dues by March 31, 2021 while balance dues are to be paid in annual instalments commencing from April 1, 2021 up to March 31, 2031, payable by 31st March of every succeeding financial year. 

(PTI)