CARE downgrades rating on Vodafone Idea's loans in view of SC's AGR verdict

Rating agency CARE has downgraded its rating on Vodafone Idea Ltd’s long-term loans and debentures from “A” to “A-” and also paced the rating under watch with negative implications.

The revision in long-term ratings factors in the Supreme Court’s (SC’s) recent ruling that telecom players have to include non-core revenues in their adjusted gross revenue (AGR) to calculate their license fee dues. Based on the court order, the Department of Telecommunications (DoT) can now raise its demand from Vodafone Idea to Rs 28,309 crore.

The company needed to comply with the SC order within three months. Further, the long stop date of the company’s Indus tower stake sale to Bharti Infratel had been revised from October 24 to December 24, 2019, to fulfil conditions for closure of the transaction. This included DoT’s approval under the foreign direct investment (FDI) regulations, CARE said.

The ratings continue to be tempered by high debt level, declining subscriber base trends, regulatory risks and prevalent intense competition in the Indian telecom industry.

In the wake of high competition in India’s mobile telephone service industry, the company’s operating performance would continue to remain a key monitorable, CARE said.