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SC rejects telcos' AGR plea: Airtel better placed, Voda’s survival in doubt

Telcos face over Rs 1.02 lakh crore in additional licence fees, SUC, penalties and interest.

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Last Updated: Jan 16, 2020, 07.19 PM IST
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Dalal Street experts say the repercussions are likely to be serious, particularly for Vodafone Idea.
Mumbai: Shares of telecom companies are likely to open lower on Friday after Supreme Court today rejected Vodafone Idea, Bharti Airtel and Tata Teleservices’ plea to review its October 24 verdict on adjusted gross revenue (AGR).

Dalal Street experts said the repercussions are likely to be serious, particularly for Vodafone Idea.

The verdict leaves the three telecom firms collectively facing over Rs 1.02 lakh crore in additional licence fees, spectrum usage charge (SUC), penalties and interest.

Airtel expressed disappointment over the decision and said it was evaluating filing a curative petition.

Ajay Bodke, CEO – PMS at Prabhudas Lilladher said it was a catastrophic blow for Bharti Airtel. “This will significantly weaken its balance sheet. For Vodafone Idea, it is an existential crisis for the company. Many lenders to these telcos were dreading this outcome, as it will add to their torrent of NPAs (both fund and non-fund based exposure,” he said.

Other experts echoed similar views.

“I am not surprised for telcos, but I was expecting some consideration for non-telcos. The verdict was already given, and contract was clear as well,” said Deven Choksey, Group Managing Director at KR Choksey Investment Managers.

“Bharti Airtel is relatively better placed, and there would be ultimate situation of duopoly where Bharti and Jio would rule. Vodafone Idea’s future is slightly uncertain right now, until they find a buyer. Additional capital is required to compete, and that is going to be tough,” added Choksey.

Nitin Soni, Director Corporates at Fitch Ratings said the verdict was a big setback for Vodafone Idea, as its chairman had publicly stated that they will exit the industry if they were to pay this large amount.

“It is bad news for Bharti Airtel also, but they have raised money. They have raised $2 billion equity. They have also raised another billion dollars of convertible debt, and they have good access to the capital market. If Vodafone Idea is not able to pay this and they exit from the industry, then a big player with 300 million subscribers exiting from the industry will be positive both for Jio and Bharti, because they will start gaining a lot of subscribers. So that will be a good positive for Bharti as well” he added.

Vodafone Idea and Bharti Airtel have been the worst hit by the top court’s order, facing statutory dues of Rs 53,039 crore and Rs 35,586 crore, respectively, which they need to pay up by January 23.

Tata Teleservices, which has sold its consumer mobility business to Airtel, faces dues of Rs 13,823 crore.

Vodafone Idea — whose Rs 50,922 crore loss in the September quarter was the worst in India’s corporate history — had set aside Rs 25,680 crore for AGR dues. Bharti Airtel — which posted the third-worst quarterly loss ever for India Inc at Rs 23,045 crore — provided for Rs 28,450 crore.
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