Bharti Airtel, Vodafone Idea are all now facings fresh crisis after the recent supreme court judgment which has canceled there review petition filed before the Supreme Court earlier which has been compounded by weakening financials amid stiff competition from Reliance Jio.
India’s apex court has canceled the file review petitions filed by telecom companies against its verdict on the Adjusted Gross Revenue (AGR) yesterday
Bharti Airtel and Vodafone Idea had called for an open court hearing. The companies have now to pay pending AGR dues to the Department of Telecommunications by January 23.
Telecom companies, who are looking at a payout of Rs 92,000 crore, had sought urgent relief on the AGR verdict earlier this month.
Following an urgent hearing on January 8, the SC bench led by Justice Arun Mishra comprising Justices SA Nazeer and MR Shah had ruled that the apex court would take a call after talking to the Chief Justice of India Sharad Arvind Bobde, as to whether the review petitions filed would be heard in an open court or not. Now with the supreme court judgment coming on all the telecom players like Airtel and Vodafone will have to most up
With the payment deadline looming close, telecom players have expressed their inability to pay the pending AGR dues.
Vodafone Idea Chairman Kumar Mangalam Birla has said the telco would shut shop without the government’s help. Bharti Airtel Chairman Sunil Mittal has also asked the government to be sympathetic towards telcos.
The reason mentioned by both companies is the heavy losses incurred by them since the entry of Reliance Jio.
Vodafone Idea is struggling with losses for the past three years that ballooned to Rs 50,922 crore in the September quarter of FY20 – the highest quarterly loss in India’s corporate history – as it had to make significant provisions for the AGR dues.
Airtel reported record losses to the tune of Rs 22,830 crore in the same quarter.
The AGR dispute dates back to 2003 when the association of telecom operators filed the first plea with the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) challenging the definition of AGR.
As per standard accounting practice, companies have to make provisions for such claims.
As per estimates, Airtel owes about Rs 21,682 crore while Vodafone Idea’s payout will be much bigger at Rs 28,308 crore.
Their provisioning is far short of the actual amount due.
While Bharti Airtel has raised almost $10 bn via a QIP recently it is well-placed to.psy up this amount. However, for Vodafone this judgment is a big negative as it’s cash flows are weak and is unlikely to pay up in such a short time
The only factor which could save the company is the fact the government is not in favor of a duopoly in the telecom sector which can go against the interests of the consumers.
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