Vodafone Idea within a fighting chance of survival

Vodafone Idea within a fighting chance of survival

Despite an AGR burden of Rs 53,000 crore, Vodafone Idea hopes for a fresh lease of life, right before a crucial meeting of the highest decision-making authority in the Telecom Ministry

Ahead of the crucial meet of Digital Communications Commission (DCC) on the AGR issue, Vodafone Idea is staring at a fresh lease of life. Despite an AGR burden of Rs 53,000 crore, there are reasons for Vodafone Idea to look forward to a better future.

The telco has reportedly written a letter to the government asking for adjustment of Rs 8,000 crore of Goods and Services Tax (GST) refund towards AGR dues. In addition, the telco has requested deferment of the AGR payment schedule. Vodafone Idea is also batting for reducing license fee from existing 8 per cent to 3 per cent, and spectrum usage charges (SUC) from about 3 per cent currently to 1 per cent.

These demands have been raised just before a meeting between Telecom Secretary Anshu Prakash, NITI Aayog CEO Amitabh Kant, and others on Thursday. As the highest decision-making authority in the Telecom Ministry, DCC members are likely to discuss relief measures for telcos such as giving soft loans to them to pay up their AGR dues, and easier payment terms on components like interest, penalty, and interest on penalty, which together constitute nearly 74 per cent of the overall AGR dues. A soft loan is essentially a loan given on lenient terms as compared to the usual loans available in the market.

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Vodafone Idea is also reportedly mulling over seeking funds against its 11.5 per cent stake in Indus Towers, which is the largest tower company in the country. The funds generated from the deal would help relieve the liquidity crunch in the telco. Market sources say that the last week's meeting between Finance Minister Nirmala Sitharaman and telco bosses - Vodafone Idea Chairman Kumar Mangalam Birla and Bharti Airtel Chairman Sunil Mittal - went well. The Minister reportedly assured them of providing relief to the distressed sector. Since then, market has been abuzz with reports of some kind of relief could be on the way for telcos.

"Even if some of the Vodafone Idea's demands are met, it would have a fair chance of revival despite the tough conditions that it is facing," says a telecom analyst.

"I think that the chances of the telecom sector's revival, including that of Vodafone Idea's, would be credible if the government is ready to review the policy. Unless something major is decided upon that includes rescheduling of the large payments, Vodafone Idea would still be in the woods," says Mahesh Uppal, director at NCR-based consultancy firm ComFirst, referring to the 'half-hearted' measure announced by the committee of secretaries (CoS) in November that gave two-year moratorium on spectrum payment instalments for 2020-21 and 2021-22.

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Earlier, there were reports that the government is looking at bringing ordinance to change the definition of AGR which would provide succor to the sector. The proposal didn't seem to go anywhere as there were several issues with it.

Telcos like Vodafone Idea and Airtel have thus far suffered back-to-back setbacks from the Supreme Court in their pursuit of seeking relief in the AGR matter. After the rap from the court in February, Vodafone Idea has submitted Rs 3,500 crore with the Department of Telecommunications (DoT) while Airtel has deposited Rs 10,000 crore with a promise to pay the remaining amount before March 17 - the next date of hearing on the matter. As per some reports, DoT's own estimates on AGR dues seem to be differing from telcos', and the department has asked telcos to submit documents supporting their internal estimates. The total dues of telcos are likely to jump as license fee dues for 2017-18 and 2018-19 are expected to be added in the final calculation which are not currently part of the Rs 1.47 lakh crore dues.

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Published on: Feb 26, 2020, 11:45 PM IST
Posted by: Vivek Punj, Feb 26, 2020, 11:45 PM IST