DoT has written to Bharti Airtel and Vodafone Idea, both of whom have indicated their desire to opt for a moratorium, and also to Reliance Jio, which may also do so.
The Department of Telecommunications (DoT) has reached out to mobile operators seeking their response on whether they want to opt for a four-year moratorium on spectrum payments and adjusted gross revenue (AGR) dues. The department has also sought their views on whether they would prefer to convert the interest, which would accrue during the moratorium, into equity. Telcos need to revert by October 29 if they choose the moratorium option; they have a further 90 days to respond on the equity conversion.
For Bharti Airtel and Vodafone Idea, the equity conversion will be done by invoking Section 62 (4) of the Companies Act; the amount will be treated as a loan until the conversion is completed. The relevant date will be August 14, a month before Cabinet approval.
“For the valuation of shares or equity, it will be equal to higher of the average of weekly high and low of the volume-weighted average price of the equity shares during the last 26 weeks preceding the relevant date, subject to the provision under Section 53 of the Companies Act (ie shares cannot be less than par value),” persons familiar with the process explained.
The equity shares will be issued by the company, to the government, on a preferential basis. Further, details of the interest amount will be furnished by the company and certified by DoT. “The net present value (NPV) of the interest amount will be calculated as on the date of exercise of option. This interest amount will continue to be treated as a loan to the company till the completion of the equity infusion process,” the DoT said.
For unlisted companies, the equity conversion will be decided in consultation with the finance ministry as there is no established procedure. Jio is an unlisted company but is unlikely to opt for an equity conversion.
The Union Cabinet had on September 15 approved the much-awaited revival package for the telecom industry, which was a combination of cash flow relief for the financially stressed operators, long-term measures like redefinition of AGR and scrapping of spectrum usage charges in future auctions.
The highlight of the package, which provides immediate cash flow relief to the financially-stretched Vodafone Idea, is the deferral of AGR dues by four years with the net present value (NPV) protected. Similarly, the deferred spectrum instalments — for spectrum acquired in the past auctions — has also been deferred for four years. Together with the two-year moratorium for FY21 and FY22, operators have got a six-year moratorium.
The deferment of AGR and spectrum dues will provide cash flow relief to Vodafone Idea to the tune of around `88,000 crore for the four-year period. The company’s annual AGR instalment works out to around `8,000 crore and that on spectrum to `14,000 crore. Analysts said the measure surely gives Vodafone Idea time to tide over its cash flow problems but the company would revive only if it pumps in funds and generates enough cash to invest in its networks and check subscriber churn.