What's next for Vodafone Idea, Bharti Airtel after Supreme Court's AGR blow?
by Manu KaushikAGR row: Soon after the court judgement, Airtel said that it's in the process of doing self-assessment of the dues, and shall submit Rs 10,000 crore by February 20
AGR row: In what seems like an end of road for the telecom operators, the Supreme Court denied any relief to them on the AGR (adjusted gross revenues) issue. The court took a tough stance against them, and asked to pay up the dues of Rs 1.47-lakh crore by the end of February 14. The court said that it will initiate contempt against telcos as not even a single penny has been deposited yet as directed by the court in its October judgment. The court also said that "we draw contempt proceedings against the desk officer" at the DoT (department of telecom) for violating the court's earlier order.
In addition, the three-judge court also summoned the top bosses of Bharti Airtel, Vodafone Idea, MTNL, BSNL, Reliance Communications, Tata Tele and others to appear in court on March 17 - the next date of hearing in the case. "This case projects a very disturbing scenario. The companies have violated the order passed by this court in pith and substance. In spite of the dismissal of the review application, they have not deposited any amount so far. It appears the way in which things are happening that they have scant respect to the directions issued by this court," the order said.
Soon after the court judgement, Airtel said that it's in the process of doing self-assessment of the dues, and shall submit Rs 10,000 crore (out of the total dues of about Rs 35,600 crore) by February 20. "We are confident we will complete the self-assessment exercise shortly... supporting documentation and calculations (financial year and license wise) in respect of the self-assessment and payments, will also be submitted by us in due course," said Airtel's letter to the DoT member.
It has come as a big shock for telcos who were expecting some kind of relief from the court to negotiate easier payment terms with DoT which is supposed to collect the dues from telcos. Earlier, the apex court had dismissed the review petition of telcos seeking succour on the overall due amount.
Devoid of any options, the telcos will have to submit the AGR dues now. While Airtel has recently raised some $3 billion - through qualified institutional placement (QIP) and overseas bond - to pay up the dues, it's not clear how the Vodafone Idea will clear its AGR liabilities. As on December 31, the telco had cash and cash equivalents of Rs 12,530 crore with net debt of Rs 1.03 lakh crore. Just last week, one of the telco's parent firms - Vodafone Group Plc - had said that the outlook for its India JV (Vodafone Idea) is critical whereas in December, Aditya Birla Group chairman Kumar Mangalam Birla had suggested that the telco would shut shop if there was no relief from the government.
Vodafone Idea has been posting net losses for three consecutive years, and in the September quarter, it posted the highest quarterly losses (of Rs 50,922 crore) in the history of corporate India.
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Though weak, Airtel is in a much better condition, and not as fragile as Vodafone Idea. Its cash and bank balances stood at Rs 10,206 crore, and net debt at 1.15 lakh crore as on December 2019. The AGR liabilities of Airtel are just within the reach of its recent fund raising and existing cash balance.
Given the recent judgment of the court, it seems that the government cannot help telcos even if it intends to. So far, the government has given half-hearted relief to the sector by way of two-year moratorium on their spectrum-related dues over 2020/21 and 2021/22.
Even though telcos were hoping for relief, some industry experts saw this coming. "In order to show their bona fide, incumbent telcos should have at least deposited the principal amount pertaining to the AGR case, and would have sought clarification on other components such as penalty, interest and interest on penalty. In the current situation, Vodafone Idea must submit whatever cash resources it has so save itself from the court's punitive action," says a telecom expert.
While Airtel's letter to the DoT, and its cash situation exude some confidence; Vodafone Idea's deepening crisis has made its future more uncertain than ever before.
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