On Thursday in response to the SC order, Bharti Airtel had said the operators have invested billions of dollars in developing the sector and this decision has come at a time when the sector is facing severe financial stress and may further weaken the viability of the sector as a whole.
The massive Rs 92,000-crore payout which incumbent telecom operators need to make to the government as outstanding licence fee after the Supreme Court order on October 24 imperils their very existence. The total amount would go up even higher to around Rs 1.33 lakh crore if the spectrum usage charge dues are also taken into account.
Though the companies which are supposed to make the largest amount of payment, Vodafone Idea and Bharti Airtel, expressed their disappointment on Thursday, the latter on Friday went to the extent of stating that the SC’s judgment casts doubt on the company’s ability to continue as a going concern.
Bharti, which on Friday declared the July-September quarter earnings of its Africa unit, said: “The Group will continue to assess this risk as the impact of the court judgment becomes clearer and has considered whether this could give rise to the early repayment of the balance of the remaining $2.2 billion of Notes. This represents a material uncertainty that may cast significant doubt on the Group’s ability to continue as a going concern”.
It, however, went on to add: “However, the Group has cash and facilities together with a number of financing options and other operational mitigation measures available to it should they be required and has concluded that despite the risks associated with the court judgment against the intermediate parent and its impact on the Notes, the Group will be able to continue as a going concern”.
The company will announce the July-September quarter earnings of its India business on October 29. Bharti’s dues to the government as a fallout of the SC order is to the tune of Rs 21,682 crore.
The situation of Vodafone Idea is grimmer. The company had total cash balance of Rs 21,000 crore at June end and its liability to the government as a result of the SC order is Rs 28,308 crore.
After the company’s April-June earnings, Kotak Institutional Equities had noted: “The company’s current gross cash balance of Rs 21,200 crore and likely the Indus stake sale proceeds of `5,600 crore add up to a fund availability of Rs 26,800 crore. Even at a lower-than Q1FY20 cash burn rate, despite expected increase in capex, of Rs 5,000 crore per quarter, the company would burn through the current gross cash balance in less than six quarters from now”.
The brokerage had also estimated Vodafone Idea’s cumulative cash inflows over the next seven quarters, from July-September FY20 to January-March FY21, to add up to Rs 25,900 crore. If the company’s Rs 21,200 gross cash balance as on June end, is clubbed, total cash with the company is estimated at Rs 47,100 crore.
According to Kotak, the company’s cash outflows over the same period at a massive Rs 54,700 crore, which would include capex, non-spectrum debt repayments, and deferred spectrum payout, would leave a funding gap of Rs 7,600 crore.
On Thursday in response to the SC order, Bharti Airtel had said the operators have invested billions of dollars in developing the sector and this decision has come at a time when the sector is facing severe financial stress and may further weaken the viability of the sector as a whole. “Of the 15 old operators impacted by the order, only two private sector operators remain in service today. The government must review the impact of this decision and find suitable ways to mitigate the financial burden on the already stressed industry,” Bharti had said.