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Vodafone Idea, Airtel shares rise up to 8% amid reports of bailout package

While Vodafone Idea share zoomed 8.57 per cent to Rs 4.18, Bharti Airtel stock also gained 3.13 per cent to Rs 371.20.

twitter-logo BusinessToday.In        Last Updated: October 30, 2019  | 14:18 IST
Vodafone Idea, Airtel shares rise up to 8% amid reports of bailout package
Vodafone Idea stock has fallen 40.06% in last 6 days.

Vodafone Idea and Bharti Airtel shares rose in trade today amid reports the government has constituted a panel to work out a bailout package for the telecom sector. While Vodafone Idea share zoomed 8.57 per cent to Rs 4.18, Bharti Airtel stock also gained 3.13 per cent to Rs 371.20.

Vodafone Idea stock has fallen 40.06% in last 6 days.

Reports say the panel has been asked to examine "all aspects" of "financial stress" faced by service providers such as Bharti Airtel and Vodafone-Idea and suggest measures to mitigate them.

The Committee of Secretaries (CoS), which will comprise secretaries to the ministries of finance, law, and telecom, will also look into other issues such as delay in spectrum auction payment dues for FY21 and FY22 and telcos' long-pending demands of a reduction in spectrum usage charges and universal service obligation fund levy.

Telecom Regulatory Authority of India (TRAI) may also look into the demand for a reduction in the minimum charge (floor tariff) for voice and data services.

The need for a bailout package has arisen after the Supreme Court allowed the government's plea last week to recover adjusted gross revenue (AGR) of Rs 92,000 crore from telecom service providers.

Also read: About 40,000 telecom jobs at risk after SC verdict puts Rs 92,600 crore burden on sector

On October 24, 2019, the Supreme Court upheld the government's plea on its interpretation of Adjusted Gross Revenue (AGR). A bench of justices Arun Mishra, S Abdul Nazeer, and MR Shah held that most revenue components, "except one or two", would fall within the Department of Telecommunications' (DoT) definition of AGR, thereby ending over 14 years of legal battle between the Centre and the telecom companies.

AGR verdict fallout: Can Airtel, Vodafone Idea survive the Rs 92,000-crore blow?

After the rejection of appeal against the definition of AGR, telecom companies would now have to pay over Rs 92,000 crore to the DoT. The SC said it would later fix a time schedule as to when the telecom companies have to pay the amount.

In a filing in the apex court in August, the DoT had asked telcos to pay up Rs 92,641 crore on account of license fees and spectrum usage charges (SUC), which are decided on the basis of AGR. AGR is calculated on the basis of spectrum usage charges and licence fees payable by telecom companies. The telecom companies are liable to pay around 3-5 per cent of AGR as spectrum usage charges and 8 per cent of the AGR and licence fees.

By Aseem Thapliyal

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