The Supreme Court on Tuesday granted 10-year window to telecom companies like Vodafone Idea, Bharti Airtel and Tata Teleservices for paying the Adjusted Gross Revenue (AGR) related dues to the Department of Telecommunications (DoT). A bench headed by Justice Arun Mishra has asked telcos to pay 10 per cent of the AGR-related dues by March 31, 2021. It further stated that the companies have to make the payment by February 7 every year, while failure to pay installments would incur penalty, interest and contempt of court.
According to SBICap Securities, debt-laden Vodafone Idea, which owes more than Rs 50,000 crore in AGR related dues, will have to pay annual AGR installments at Rs 7,853 crore for ten years. Given the fragile financial health of Vodafone Idea, it is going to be difficult for the operator to make 10 per cent upfront payment or annual installments over 10 years.
Of the total AGR dues, the telecom major has made a payment of Rs 7,854 crore. As of June, it had a cash holding of about Rs 3,450 crore, while its gross debt (excluding lease liabilities) stood at Rs 1,18,940 crore, including deferred spectrum charges of Rs 92,270 crore.
Vodafone Idea's reserves and surplus account have been completely eroded by revenue loss in last one year. The country's third largest telecom operator posted a staggering net loss of Rs 73,878 crore in financial year ended March 2020, the highest ever by any Indian firm, followed by loss of Rs 25,460 crore in the first quarter ended June 30, 2020.
The company took a hit of Rs 1,783.6 crore on account of AGR related liabilities, and Rs 3,887 crore on account of one-time spectrum charges (OTSC), both of which were recognised as exceptional items during the quarter ended March 2019.
In the June quarter earnings release, the company had said the liability has "cast significant doubt on the company's ability to continue as a going concern". It has planned to achieve Rs 4,000 crore of annualised cost savings over next 18 months through cost optimisation plan. As a step in that direction, the company is in the process of organisation wide restructuring.
Vodafone Idea has also decided to monetise its 11.15 per cent stake in Indus Towers for over Rs 4,000 crore. "The value of its 11.15 per cent Indus stake equates to a cash consideration of approximately Rs 4,040 crore, adding that the "final determination would take place shortly before closing of the merger," the company said in a regulatory filing on Tuesday.
Meanwhile, shares of the Vodafone Idea were down 11.38 per cent at Rs 9.03 apiece on the Bombay Stock Exchange.
By Chitranjan Kumar