The Supreme Court on Friday rejected the appeal by Vodafone Idea, Bharti Airtel and Tata Teleservices to allow correction of errors in the telecom departments adjusted gross revenue (AGR) calculations, dealing a big blow to Vodafone Idea (Vi) whose shares tanked 10% and left a could hanging over the telcos viability.The Supreme Court bench comprising of Justice N Rao and Justice Aniruddha Bose ruled, “all applications dismissed”.
However, there is still no clarity on the different interpretation between the Department of Telecommunications (DoT) and the three telcos on the timing of the 10% upfront payment towards the AGR dues. DoT says Vi, Airtel, Tata Tele should have paid another 10% of AGR dues by March 2021, and the balance spread over the next 10 years. But telcos maintain they have already paid more than 10%, and the next instalment is due only by March 2022.
The written order isnt out yet.SC’s Friday order will hit Vi the most when it is still hunting for investors to bring in Rs 25,000 crore of much needed funds. The latest verdict will now raise questions of the third largest telco’s survival.
The telcos shares plunged 10% to Rs8.33 soon after the order, while Airtels shares were 1.4% lower at Rs538.90.
Vodafone Idea with a debt of Rs 1.8 lakh crore and cash balance of Rs 350 crore has linked its viability to reduction of its AGR dues, along with other factors. At its fiscal fourth quarter earnings call, the telco said it expected some relief from the SC which will reduce its AGR dues to nearly half.
Vi had self-assessed its dues at Rs 21,533 crore, Airtel at Rs 13,003 crore and TTSL at Rs 2,197 crore and all three in their petitions had said that these were far less than what Department of Telecommunications (DoT) had asked of them.
When the fund-raising announcement was made, the Board said that the maximum capital to be raised from one source was Rs 15,000 crore and therefore, approval for that had to be sought, said the person.
The SC previously had rejected their self-assessments and ruled the DoT calculations as final.The ruling left Vi facing dues of Rs 58,400 crore, Airtel, Rs 43,980 crore, and Tata Teleservices Rs 16798 crore, as calculated by the government. Of these, Vi has paid Rs 7854 crore, Airtel, Rs18,003 crore and Tata Tele, Rs 4,197 crore. The telcos need to pay their balance dues in 10 instalments through March 31, 2031.For Vi, no recalculation will mean its AGR EMI will be around 60% of 2022 cash Ebitda, driving it to a financial crisis, said brokerage CLSA. It added that to cover the AGR EMI, Vi will need an average revenue per user of Rs170, or 40% higher than in 4QFY21, mandate multiple tariff hikes or compel shutdown.