Analysts have been red flagging the implications of the recent Supreme Court ruling (on telecom revenue definition) for old operators, particularly Vodafone Idea.
Vodafone Idea on Wednesday asserted it has not made any request for debt recast to any lender or asked for reworking of payment terms, and said it will continue to pay all its debt as and when it falls due. Vodafone Idea categorically denied and dismissed speculations in certain quarters that nearly Rs 40,000 crore of potential statutory dues has compelled the company to explore a debt revamp as “baseless and factually incorrect”.
Analysts have been red flagging the implications of the recent Supreme Court ruling (on telecom revenue definition) for old operators, particularly Vodafone Idea. Some experts have not even ruled out the scenario of India becoming a two-private-mobile-operator market.
Jefferies in a report last week said AGR (adjusted gross revenue) ruling against telcos is a “major negative” for Vodafone Idea and “raises concerns on balance-sheet solvency” for the company. Credit Suisse has said if the government offers relief measures, in form of deferred payment of current fines, reduced licence fee, and two-year moratorium on spectrum dues, the scenario will be “most beneficial” for VIL, although even then the company will still require additional equity infusion in the long run.
Jefferies had said that while the ruling has raises concerns on balacesheet solvency for Vodafone Idea, “it also has prospective EBITDA impact of higher fees going forward”. “In case of full payment, Vodafone Idea will have no cash for capex and spectrum installments for the next three years,” Jefferies said in its report dated October 24, the day Supreme Court upheld the telecom department’s definition of computing gross revenue, from which licence fee and spectrum payments amounts are derived.
A Vodafone Idea spokesperson on Wednesday said: “We have not made any request for debt recast to any lender or asked for reworking of payment terms”. “We continue to pay all our debts as and when these fall due,” the spokesperson added.
Following the SC ruling, Vodafone Idea’s stocks have taken a major beating on the bourses and the company has stated that it will approach the government for relief, including a waiver of interest and penalties. In a filing last Friday, Vodafone Idea Ltd (VIL) had said the apex court’s verdict on the Adjusted Gross Revenue case, represents a “significant event”, and has financial implications, which the company is reviewing.
“The judgement has financial implications, which we are reviewing. We will engage with the DoT (Department of Telecom) in order for it to consider granting relief, including a waiver of interest and penalties,” Vodafone Idea had said in the recent filing.
Holding out hope for the crisis-ridden sector, the government has constituted a committee of secretaries to explore a financial bailout package for the telecom sector by lowering spectrum charges as well as ending the era of free mobile phone calls and dirt cheap data.
The committee, headed by Cabinet Secretary Rajiv Gauba, has been asked to examine “all aspects” of “financial stress” faced by service providers such as Bharti Airtel and Vodafone-Idea and suggest measures to mitigate them, sources in the Department of Telecommunications (DoT) have said.