Voda Idea, Airtel may offer spectrum, assets, tax refunds as securities for AGR payments

New Delhi: Vodafone Idea and Bharti Airtel are considering offering their spectrum, tangible assets and tax refunds as security to the Supreme Court, which asked them to show how they will pay their statutory dues, senior executives said.

“There are sufficient assets in the books of telecom companies to provide for security against staggered payment over 20 years,” a senior industry executive told ET on condition of anonymity.

The Supreme Court asked the telcos to submit within the next five days their roadmap for payment of dues and the timeline along with the security they will furnish to protect future payments to the government.

Bharti Airtel had raised $3 billion through a combination of a rights issue and an overseas sale of convertible bonds as it prepared to pay its adjusted gross revenue dues in January.

Equity research firm SBICAP Securities estimates that Bharti Airtel is better positioned to pay its outstanding dues.

“Bharti, in our view, is relatively better placed and possibly could furnish bank guarantees or other possible solutions, as staggered payments will help Bharti to keep investing in network, address market share, and even address regulatory dues,” it said.

Airtel and Vodafone Idea didn’t respond to emailed queries.

Cash-strapped Vodafone Idea expressed its inability to shore up money to pay the AGR dues to the government at one go, saying it would be forced to close. Mukul Rohatgi, the company’s counsel, said it wouldn’t be possible to furnish bank guarantees, given the financial constraints.

According to industry estimates, the telco has net tangible assets worth Rs 40,000 crore. Its spectrum holding is valued at almost Rs 1.2 lakh crore, apart from the Rs 8,000 crore in input tax credits and Rs 12,000 crore in income tax refunds, which it has been pursuing with the government. The company has net debt of over Rs 1.1 lakh crore. The spectrum liabilities are estimated at $11.7 billion, according to SBICAP Securities.

“Even though the company does have significant value in its plant and equipment, it might be an uphill task to convince the court of security against this asset as there might not be many buyers for it,” said Rohan Dhamija, managing partner for Middle East and South Asia at Analysys Mason.

Industry officials said the telcos are expected to seek clarity from the Department of Telecommunications on the amount that needs to be paid, given that the figure has varied since the Supreme Court’s October 24 order. Responding to the apex court’s order, telcos are likely to stick to a maximum 20-year roadmap as proposed by the telecom department.

According to a cabinet decision taken on March 13, the government proposed a formula that includes spreading the AGR dues over 20 years at a discounted rate of 8% and freezing interest and penalty components as of October 24, when the Supreme Court ruled in favour of the Centre’s calculation of AGR.

The government’s proposal says the net present value will be “protected using the discount rate.”

As reported by ET on March 16, besides these proposals, the government is considering a broad package for the competition stricken and debt-ridden sector, including providing a sovereign guarantee of 15% of AGR dues if an operator were to approach a public sector bank for a loan. This was taken given the stress in the sector before the Covid-19 outbreak.

Vodafone Idea has paid Rs 6,854 crore of the AGR dues it owes to DoT, which the company assessed at Rs 21,533 crore. According to DoT’s most recent estimate filed with the Supreme Court, the company owes Rs 58,254 crore.

Bharti Airtel claims to have paid its entire dues of Rs 13,004 crore and an additional Rs 5,000 crore. However, DoT estimates its dues at Rs 43,980 crore.

[Source – Economic Times]


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