Vodafone Idea may pay part of AGR dues to stay afloat

MUMBAI | NEW DELHI: Vodafone Idea (VIL) may offer the government a small part of its statutory dues by January 23 to ensure it doesn’t get a defaulter’s tag or incur the displeasure of the Supreme Court, and then seek some relief, in a bid to bring back the telecom company from the jaws of insolvency, three people familiar with the matter said. Simultaneously, the telco plans to seek an extension of the January 23 deadline from the Supreme Court.

“The top management have chalked out the next steps after the apex court dismissed the telco’s review petition,” said one of the people.

The government has estimated Vodafone Idea’s total dues, which include licence fees, spectrum usage charges (SUC), penalties and interest, at over Rs 53,000 crore but the telco is expected to submit a lower figure in its self-assessment.

Vodafone Idea’s shares ended 25.21% lower at Rs 4.51 on BSE, having plunged over 39% during the day, as investors exited on fears that telco will collapse in the absence of relief from the judiciary.

After offering a small payment, Vodafone Idea may ask the Centre to refund or adjust some of the Rs 9,000 crore pending input tax credit under GST that it believes the government owes it, one of the persons said. He added that the strategy of the company is to show the telecom department that it is not defaulting on its payments and is trying all possible ways to meet statuary obligations.

Another person in direct knowledge of the matter said that the loss-making telco may offer under Rs 4,000 crore “as a token amount on January 23”. He added the company won’t dig into its cash balances since it is a cashflow-negative company.

“Parting with cash balances would jeopardise its payment obligations and put it at risk of being a financial defaulter with banks,” the person said. The company had cash and cash equivalents of Rs 12,800 crore as of September end.

An email sent to Vodafone Idea remained unanswered till press time.

Recently, the telco’s board approved modification in the use of the Rs 25,000 crore right issue proceeds to pay Rs 2,826.1crore towards the AGR dues. In addition, the company can call upon Vodafone UK to cough up Rs 8,000 crore towards payment of AGR dues.

“The group’s potential exposure under this mechanism is capped at Rs 8,400 crore (1.1billion Euro),” Vodafone said last November.

ASSET MONETISATION

Vodafone India has also said it is trying to sell its data centres, optic fibre assets as well as its 11% stake in Indus Towers to raise more funds.

Vodafone and Aditya Birla Group, the two promoters of the company, said recently they won’t infuse additional equity in the company.

A government official said that the only way ahead for the telco to show that it is not defaulting is to make some payments, else all doors of government relief will be shut.

Vodafone Idea, along with some 14 telcos, need to pay about Rs1.47 lakh crore to the telecom department by a Supreme Court (SC)- mandated deadline of January

23. On Thursday, the top court had rejected pleas by the telco, Bharti Airtel and Tata Teleservices to review its October 24 verdict that had widened the definition of adjusted gross revenue (AGR). Licence fees and SUC are paid on the basis of AGR. Vodafone Idea now plans to file a curative petition at the SC.

The government has previously said that it can’t offer any relief on the AGR dues, unless directed by the court. But it has also publicly backed a three-player private sector market, which gave market experts some hope that a Cabinetbacked relief may be an option.

In a report, brokerage firm IIFL Securities said that the government is likely to spread out the AGR due payments over a long period —10-20 years — to avoid pushing Vodafone Idea into bankruptcy.

“The consequence of no action by the government would definitely include a major hit to government revenues (Rs 91,000 crore from VIL in old spectrum dues, plus this AGR penalty), a significant hit to the banking system, and a reputation hit for India as an investment destination,” IIFL said.