SC may not allow an extension of 20 years of payment to Telco industries
By MYBRANDBOOK
As an assurance of clearing all AGR dues over a 20 year period, Supreme Court has suggested telecom giants like Vodafone Idea to furnish personal guarantees which the telcos may find difficult. The Supreme Court agreed to consider a government plan of payment of Rs 93,520 crore of balance dues by Vodafone Idea, Bharti Airtel and other telcos over 20 years.
It, however, sought to know what guarantees can be sought to ensure telecom companies abide to a timeframe and payment schedule it decides.
"The apex court has asked private telcos to provide for security and payment roadmap in an attempt to allow telcos to repay AGR dues over a 20 year period," SBI Cap Securities said in its comments on the court order.
"In our view, telcos may find it tough to furnish personal guarantees and as such, the apex court (is) unlikely to allow for 20 years and most likely consider a shorter time frame which may not be good news for Vodafone Idea," it said.
Vodafone Idea had to pay Rs 58,254 crore as dues to the government following the October 24, 2019 judgment of the Supreme Court asking non-telecom revenues to be included in adjusted gross revenues (AGR) that form the basis for calculating statutory dues. Of this, the company has paid only Rs 6,854 crore.
The second order was pertaining to private telcos, where the apex court asked the private sector telecom firms to provide a payment roadmap and security. Bharti Airtel owes Rs 25,976 crore after paying Rs 18,004 crore.
"While both will need to raise debt to repay the outstanding dues, Bharti, in our view, is relatively better placed and possibly could furnish bank guarantees/other possible solutions, as staggered payments will help Bharti to keep investing in the network, address market share, and even address regulatory dues," it said.
Bigger concerns seem to be around Vodafone Idea which has already suggested that it will not be able to furnish bank guarantees.
The same is the case with Bharti, where the spectrum dues are to the tune of USD 5.7 billion, much higher than the AGR dues of USD 3.4 billion, it said.
"So, any shutdown or focus purely on only the AGR dues may impact the ability of the telcos to repay the spectrum-related dues which are even higher," it said.
On the other question around time frame and security, it said if the 20 year time period is used by the government, both from a licence tenure and spectrum lease/auctions perspective, a similar practice can be applied when it comes to AGR dues.
"That said, we don't think that the apex court in the final hearing of the matter will allow for 20 years and it is likely to be anything between 10-15 years," it said.
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