AGR case: Bharti Airtel, Vodafone Idea may submit separate payment plans

A day after the Supreme Court directed Bharti Airtel and Vodafone Idea to submit a roadmap for paying dues linked to adjusted gross revenue (AGR), the legal teams of the two telcos rushed into meetings to finalise their respective strategy. While the top court had asked the companies to file a joint affidavit within five days, they’re racing against time to prepare separate payment plans and proposals, according to sources in the know. They would be presented together to the SC next week. 

Counsels of both the mobile operators had sought a fortnight for submission of the affidavit.

Rajan Mathews, director general, Cellular Operators Association of India (COAI), said the telcos were expected to file their individual responses sought by SC.

As the AGR issue is back in the telecom space after a gap of nearly three months, analysts believe that the staggered payment schedule of 20 years is the only option to keep three players in the sector. A shorter payment period will entail a higher annual outgo towards AGR dues and hamper telcos’ ability to pay.

Earlier, in its petition to the SC, the Department of Telecommunications (DoT) had sought relief via 20-year staggered payment for the telcos' dues along with a waiver of interest and penalty.

In its submission in the SC, Vodafone Idea had said it would not be able to file the affidavit in such a short time because the dues were huge. The company even went to the extent of saying that it does not even have enough money to pay salaries to employees or even pay bank guarantee.

On March 6, the company had pegged its total dues to the government at Rs 21,533 crore, while DoT estimated it at over Rs 53,000 crore. The company has made a part payment of its dues.

Airtel is also struggling to file the details before the apex court due to paucity of time.

On a self-assessment pattern, Bharti Airtel paid Rs 13,004 crore to the government in two installments. It had also deposited an additional Rs 5,000 crore as an ad-hoc payment to cover any reconciliation differences. However, according to DoT estimates, the company has to pay Rs 35,500 crore.

The court will hear the matter again on June 18.

Institutional brokerage firm CLSA said, “Linked to the AGR case is Vodafone Idea management decision to declare insolvency besides Bharti Infratel merger plans with Indus Towers.”

Bharti Infratel postponed the scheduled merger meeting to allow time for all parties to consider the AGR hearing outcome.

Although Vodafone Idea has paid only Rs 6,900 crore for AGR, with likely reliefs of staggered payments and lower demand, management could reconsider an insolvency plan.

Equity research firm Credit Suisse believes that the SC observation is a “bit harsh” for Vodafone Idea, given the cash flow constraints the company faces.

It believes that the long-term viability of Vodafone Idea continues to remain under a cloud without strong operational improvement and significant equity infusion.