The government is exploring ways to allow telcos such as Vodafone Idea and Bharti Airtel to pay their adjusted gross revenue (AGR) dues over 20 years, and may seek a legal opinion on a possible mechanism, government officials said. Separately, the process to finalise a relief package for the sector is picking up pace.
Any government bid to relax the AGR payment tenure needs to take into account the Supreme Court ruling, which mandated telcos to pay their dues over 10 years, through March 31, 2031. This was despite the cabinet having recommended a 20-year time frame to pay those dues.
“The cabinet had earlier approved of a 20-year AGR payment tenure but the Supreme Court has given telcos 10 years," said one of the officials. "Now, typically the government does not overrule the decision of the Supreme Court but in this case, it has to keep the health of the sector, banks, employees and the entire ecosystem in mind.”
At a recent earnings call, Vodafone Idea MD Ravinder Takkar said the government does have the powers to give more time to pay the AGR dues.
Move would spell relief for Vi
"I believe the government has the powers, although I think it is also helpful if the court agrees that these errors should be removed," Takkar had said. "Even in the Supreme Court filing, they (government) had presented a cabinet note on which the details of the number of instalments and so on were put in…that was obviously approved by the cabinet."
Any move which leads to a reduction in AGR dues or even the annual AGR instalments will come as relief for loss-making Vodafone Idea. The telco – which had Rs 920 crore in cash and cash equivalents at June end and is burdened with Rs 1.9 lakh crore of debt – faces Rs 58,254 crore in AGR dues, of which it has paid Rs 7,854 crore.
As things stand, it needs to pay around Rs 9,000 crore as its next AGR instalment, which falls due in March 2022. Experts say the carrier won’t be able to make the payment unless it raises funds, increases tariffs and gets relief from the government. Vodafone idea has cited relief in AGR dues as a key factor in determining whether it continues as a going concern.
Bharti Airtel, which is much stronger financially, faces Rs 43,980 crore in AGR dues, of which it has paid over Rs 18,000 crore. It needs to pay less than Rs 4,500 crore as its AGR instalment in March 2022. Any reduction will help it free up cash for network investments and prepare for 5G rollouts, say experts.
Vodafone Idea, promoted by UK’s Vodafone Group and India’s Aditya Birla Group, and Bharti Airtel have been trying to get their AGR dues reduced through legal means. But their efforts so far have failed. The two have recently moved a review petition against a July top court order, which had junked their pleas, seeking a recalculation of their AGR liabilities, citing arithmetical errors in the telecom department’s calculations.
Another official said that internal consultations on ensuring the sector retains a four-cornered structure—three private sector companies plus state-owned BSNL—have picked up pace. In signs of heightened activity, top officials of Vodafone Idea, including managing director Takkar, met telecom secretary Anshu Prakash last week.
"The Vodafone Idea executives were asked to share details of how soon they will be able to get investment into the company, once the government announces a relief package," said a senior government official. "The government wants to know not just the quantum of investment but details of the company's medium-term plans, including how they expect the ARPU (average revenue per user) and related metrics to improve once the government relief and consequent investment flows into the company, their business plans for 5G and so on." He added that the government wants to ensure that its efforts to maintain a three-private player telecom market don't go in vain.
However, the telco has only said that investors would be ready to pump in money once the sector became viable, for which immediate sectoral relief was needed.
The government has also been pushing the promoters of Vodafone Idea – UK’s Vodafone Group Plc and Aditya Birla Group (ABG) – to infuse fresh equity into their joint venture. But both have so far maintained that they won’t be investing fresh funds into the carrier.
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