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Vi’s funding plan takes a hit as SC scraps plea on AGR dues

Vodafone Idea Ltd’s stock hit the lower circuit twice on exchanges on Friday after the SC order, and closed 10% down at  ₹8.36 apiece on BSE.Premium
Vodafone Idea Ltd’s stock hit the lower circuit twice on exchanges on Friday after the SC order, and closed 10% down at 8.36 apiece on BSE.

Cash-starved Vodafone Idea Ltd’s stock hit the lower circuit twice on exchanges on Friday after the SC dismissed the telco’s plea to allow payment of self-assessed adjusted gross revenue (AGR) dues that are way lower than that demanded by the department of telecom (DoT).

The Supreme Court’s (SC’s) Friday verdict will make fundraising an uphill task for the struggling Vodafone Idea (Vi) Ltd as potential investors do not expect the company to generate enough cash in the near future to clear its dues.

Cash-starved Vodafone Idea Ltd’s stock hit the lower circuit twice on exchanges on Friday after the SC dismissed the telco’s plea to allow payment of self-assessed adjusted gross revenue (AGR) dues that are way lower than that demanded by the department of telecom (DoT).

Vodafone Idea’s share price closed 10% down at 8.36 apiece on BSE.

Two people who are directly aware of Vodafone Idea’s fundraising struggle said on the condition of anonymity that the top court’s decision will make it tougher for Vodafone Idea to find an investor as the terms on which the company was planning to rope them in were based on expectations that the SC would allow the company to pay recomputed AGR dues, which would have eased the burden on the telecom service provider to a large extent.

The government has demanded 58,254 crore as AGR dues from Vodafone Idea, while the company has assessed this at 21,533 crore. Vodafone Idea has so far paid only 7,854 crore.

“With AGR dues continuing to be so high, tariffs low, stock being beaten down, average revenue per user (ARPU) suffering, number of customers shutting and leaving Vodafone Idea’s account every month, it will now be an uphill task for the telco to convince any investor to pump capital into the firm," said one of the persons mentioned above.

“The enabling provision made by the government to allow foreign direct investment of 15,000 crore into Vodafone has to be used as quickly and effectively as possible. Any further delay may cause more damage to the stock and the customer base, which will make the situation far tougher," this person said.

The apex court on Friday dismissed the applications filed by both Vodafone Idea and Bharti Airtel.

DoT has directed Bharti Airtel to pay 43,980 crore, while the telco has self-assessed it to be 13,004 crore. The firm has already paid 18,004 crore.

The telcos alleged errors in calculating AGR figures and the related dues payable by them to DoT.

However, the solicitor general told the court that DoT has not shared any instructions on allowing the correction of errors.

On 8 July, Mint reported that to repay the dues and stay afloat Vodafone Idea plans to sell its fibre and data centre assets worth $1 billion. TPG Capital, Apollo Global, and Carlyle Group are among private equity giants that are in early talks with Vodafone Idea on this matter, said the Mint report.

Vodafone announced last year that it would raise 25,000 crore through a mix of equity and debt issuances.

In an analyst call a fortnight ago, Vodafone Idea’s top management reiterated that introduction of a floor price concept will work as the “best and most preferred" solution for tackling the industry’s concerns stemming from the current low-tariff regime that started four years ago after Asia’s richest man Mukesh Ambani-promoted Reliance Jio Infocomm Ltd entered the industry with cheap voice and internet data plans to attract users.

Vodafone Idea has recently expressed its inability to pay DoT the instalment of 8,292 crore due on 9 April 2022 as the company’s cash will be used to pay AGR dues. In a 25 June letter to the telecom secretary, it requested another year of moratorium to pay the spectrum instalment in April 2023 instead of April 2022.

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