Vodafone Idea may have to pay Rs 6,000 crore yearly instalment if SC grants 15-yr AGR payment window

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Updated: Jul 22, 2020 4:13 PM

SC asked Vodafone Idea to secure AGR dues payable, to which the telco said that the government could retain its Rs 8000 crore GST dues

Vodafone Idea, Bharti Airtel, Reliance Jio, Tata Teleservices, AGR duesOwing to the high leverage and huge cash requirements, the brokerage firm sees a bleak future for Vodafone

Telecom operators such as Bharti Airtel and Vodafone Idea requested a timeframe of 15 years to pay their adjusted gross revenues (AGR). Both the telcos revised their demand after the Supreme Court made it clear that the 20-year period for AGR payment is too long. Another telecom company Tata Teleservices has sought 7-10 years for the payment of AGR dues. The apex court in its hearing, earlier this week, reserved its order on a 20-year payout window. The court has also directed the Department of Telecommunications (DoT) insolvency proceedings details of the companies under liquidation (RCom, Videocon and Aircel) within seven days. Research and brokerage firm Motilal Oswal Financial Services estimated that Vodafone Idea may have to pay Rs 6,000 crore per year if the court grants a 15-year timeframe. “Considering dues at 8% interest rate VIL would require to pay an annual amount of Rs 5,900 crore if the SC grants a time frame of 15 years,” the brokerage firm said.

The brokerage firm also said that this amount would stand at Rs 7,500 crore for a 10-year schedule. While for a 20-year timeframe, Vodafone Idea would require to pay Rs 5,100 crore. Owing to the high leverage and huge cash requirements, the brokerage firm sees a bleak future for Vodafone Idea. While it maintained its bullish stance on Bharti Airtel and Reliance Jio on the back of their healthy balance sheets and strong network capabilities. It also iterated that Vodafone Idea will need 73 per cent ARPU hike (i.e. Rs 85 ARPU increase), in order to service its obligations. Lower payment tenure may put pressure on VIL’s cash flows.

The apex court also asked Vodafone Idea to secure AGR dues payable, to which the telco said that the government could retain its Rs 8000 crore GST dues. The SC clarified that reassessment would not be possible and it would rely on demands issued by the DoT. Vodafone Idea said that it is not seeking recalculation and neither is it revisiting demand. So far, Bharti Airtel has paid Rs 18,004 crore out of total dues of Rs 43,000 and Vodafone Idea paid Rs 7,854 crore out of its total AGR dues of around Rs 58,000 crore. As per the DoT estimates, telecom companies owe a total of Rs 1.19 lakh crore, of which it has received Rs 26,896 crore so far, with balance at Rs 92,520 crore.

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