At least two telecom service providers — Sunil Bharti Mittal-led Bharti Airtel and its rival Vodafone Idea — on Monday approached the Supreme Court seeking its permission to “work out feasible terms mutually with DoT (Department of Telecommunications)” to ensure that they remain a “going concern”.
In separate but similar pleas, both telcos have sought modification in the supplementary order in which the apex court had asked all companies to pay adjusted gross revenue (AGR) dues within three months from October 24, 2019 and file a compliance report.
In its plea, Vodafone Idea said it was “facing a huge financial stress and is not in a position to make either up front payment of the amounts due or provide any financial bank guarantees to securitise the amounts due”.
”It is therefore impossible for the appellant (Vodafone Idea) to make the entire payment of the aforesaid dues within the short period of three months,” the plea added. The company has also said that a loss of Rs 50, 898 crore in the July-September period due to factoring in of AGR payout had “eroded the net worth and the cash balance”. On the other hand, Bharti Airtel in its plea, stressed upon the larger ramifications, the financial viability of the companies impacted by the AGR judgment, and large scale job losses which could happen if no relief was given.
”The payment of the due amounts, totalling to over thousands of crores, without proper assessment and financial calculations, and appropriate time period for payment, will not only cause irreparable damage to the appellants (Bharti Airtel), but to the telecom industry at large leading to possible disruption of a public utility service owing to bad financial position of telecom companies,” the Bharti Airtel plea read.
Trying all relief avenues
Given that the telecom companies are staring at a large payout that effectively would erode net worth and cash balance of the highly leveraged firms, both Bharti Airtel and Vodafone Idea were expected to take each and every legal recourse to get some relief. Concurrently, the telcos are also expected to approach the DoT to seek any possible relief.
The apex court had on October 24 last agreed with the DoT’s definition of AGR, and said that the companies, both telecom and non-telecom, must pay all dues they owe to the government along with interest and penalty. Following the judgment, Bharti Airtel and Vodafone Idea had unsuccessfully tried to persuade the DoT to relax the deadline for payment of dues. Having failed there, the companies then moved the apex court with a review of the October 24 judgment. The review petition, which was junked by the court last week, did not give any extension on the deadline for paying AGR dues either.
While the operators said they are evaluating the option of a curative petition, it is likely that they may have to clear the dues amounting to Rs 1.47 lakh crore by January 23, as per the SC’s order on October 24, 2019. The total payout by all telecom companies combined could be as high as Rs 1.43 lakh crore after the dues for spectrum usage charges (SUC) linked to AGR is also taken into account. According to industry sources, while Vodafone Idea may have to shell out as much as Rs 53,000 crore, Bharti Airtel will have to pay nearly Rs 35,590 crore. Tata Teleservices, which sold its business to Bharti Airtel, will have to pay as much as Rs 14,000 crore in AGR dues, sources said.
Bharti Airtel and Vodafone Idea had already provisioned a total amount of Rs 34,767 crore and Rs 44,700 crore, respectively, with respect to the AGR liabilities. Notwithstanding the financial provisions already made, sector experts anticipate significant liquidity constraints for the highly leveraged sector on account of the liability payments. The SC judgment on AGR had also impacted non-telecom public sector enterprises, such as GAIL, Power Grid, Delhi Metro Rail Corporation and RailTel.
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