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Home >Industry >Telecom >SC’s AGR verdict to decide Voda Idea’s fate

New Delhi: The Supreme Court on Tuesday will pronounce its order on whether to allow telecom companies staggered payment of adjusted gross revenue (AGR)-related dues. The verdict will decide the survival of Vodafone Idea Ltd, which still owes more than 50,000 crore to the Centre in AGR dues and granting the telco time to pay the dues is the only way to save it.

Vodafone Idea sought 15 years to pay its AGR dues, including spectrum usage charge, license fee, interest, penalty, and interest on penalty. However, analysts and legal experts feel that this would only be enough if factors such as higher tariff, reduction in fixed costs, divestments, and fundraising are in the telco’s favour. Anything less than 15 years could threaten the business of the telco.

“Besides a 15-year window, Vodafone Idea’s business needs to make sense. Factors such as shareholders and investors willing to infuse capital, and adequate revenues in the next few years, will have come into play. The fact that Vodafone Idea was confident in the court with 15 years confirms that the management is positive on the business outlook," said Saurav Kumar, partner at IndusLaw.

Rival Bharti Airtel Ltd also sought 15 years, despite fully providing for the losses on account of the AGR dues. Airtel has adequate liquidity to clear its dues, according to the management of the Sunil Mittal-led firm. The department of telecommunications (DoT) estimated Airtel’s AGR dues at 43,980 crore, of which the telco has paid 18,000 crore.

Tata Teleservices Ltd, a Tata group company acquired by Airtel on a debt-free and cash-free basis, has requested 7-10 years to clear its AGR dues of 16,798 crore.

Legal experts believe that the telcos involved could seek a review of the AGR judgement.

Vodafone Idea faces liquidity stress that will require high cash flow to continue its business besides paying the AGR dues, said Motilal Oswal Financial Services Ltd in a report. The telecom operator will need to more than double its average revenue per user (Arpu) to meet its repayment obligations, said the report. Vodafone’s Arpu fell to 114 in the June quarter from 121 in the fourth quarter of fiscal year 2020. Borrowing from banks will also help the telco stay afloat.

Vodafone Idea’s fundraising plan also hinges on the SC’s decision. The telco is exploring options to raise funds but will decide on the quantum after the AGR verdict.

“We are waiting for a conclusion as far as AGR is concerned, which will give us clarity on what kind of funding requirements we have," said Akshaya Moondra, chief financial officer, Vodafone Idea, in a post-earnings analysts conference call. “We are definitely looking at opportunities for raising funds," Moondra said.

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