Winner’s curse: Govt to lose Rs 2 lakh crore if Vodafone Idea sinks

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Published: November 19, 2019 6:42:57 AM

The government has raised another around Rs 22,000 crore on the telecom operators by way of one time spectrum charge (OTSC) for spectrum held beyond 4.4 Mhz. This is currently being contested in various courts and no operator has paid any amount.

Vodafone Idea, industry news, AGR, Vodafone Idea india, Vodafone Idea share price, Vodafone Idea news, Vodafone Idea stockAccording to an analysis done by Kotak Institutional Equities at the end of June quarter, when the company’s cash balance was at Rs 21,000 crore, by January-March FY21 Vodafone would have faced a funding gap of Rs 7,600 crore.

The government will stand to lose over Rs 2 lakh crore (Rs 2,07,462 crore) if Vodafone Idea collapses under the burden of adjusted gross revenue (AGR) dues post the Supreme Court’s October 24 order.

Apart from the Rs 44,000-crore dues which the company put as its dues on account of licence fee and spectrum usage charge (SUC) as a result of the methodology upheld by the apex court, the company needs to pay around Rs 1,57,750 crore by way of deferred spectrum installments to the government till 2031. Another Rs 5,712 crore is locked in litigation over one-time spectrum charge.

The company’s global parent, Vodafone Plc has already said that it is not going to put in any more equity in India operations and the company’s cash balance at the end of September quarter was Rs 15,390 crore. According to an analysis done by Kotak Institutional Equities at the end of June quarter, when the company’s cash balance was at Rs 21,000 crore, by January-March FY21 Vodafone would have faced a funding gap of Rs 7,600 crore.

If operators like Vodafone Idea and Bharti Airtel, which together posted a loss of around Rs 74,000 crore last week after provisioning for the AGR-related dues, are hoping for some relief from the government, it is because the latter is going to be the biggest loser if Vodafone Idea or any other company sinks as a result of such massive financial hit.

Vodafone Idea, industry news, AGR, Vodafone Idea india, Vodafone Idea share price, Vodafone Idea news, Vodafone Idea stock

Apart from Rs 1.33 lakh crore that the companies owe the government by way of licence fee and SUC dues as a result of the SC order on the calculation methodology of AGR, around Rs 3,15,825 crore is owed by them to the government by way of deferred spectrum installments for spectrum bought by them in various auctions. The companies need to pay this amount till 2031.

The government has raised another around Rs 22,000 crore on the telecom operators by way of one time spectrum charge (OTSC) for spectrum held beyond 4.4 Mhz. This is currently being contested in various courts and no operator has paid any amount.

If the AGR due is added with deferred installment dues and OTSC the total government dues riding on telecom companies is more than Rs 4 lakh crore (Rs 470,825 crore). Of this already around Rs 47,628 crore is lost as these are the total dues owed by companies like Reliance Communications and Aircel, which are undergoing insolvency and the government in these cases is considered an operational creditor. Even if it gets any of its dues it would be with a huge haircut.

The total dues from Bharti Airtel works out to around Rs 109,710 crore and from Reliance Jio around Rs 44,000 crore (this only relates to deferred spectrum payment), which can be considered safe. However, analysts said that if any relief package is drawn by the government it cannot be operator specific and has to be for the industry.

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