Rating agencies downgrade Vodafone-Idea, Bharti Airtel after SC ruling on AGR

Care Ratings has downgraded its rating on long-term bank facilities and non-convertible debentures of Vodafone Idea as Fitch placed Bharti Airtel's BBB long-term foreign currency issuer default rating (IDR) on rating watch negative (RWN).

Fitch said that the RWN reflects uncertainty on the amount and timing of unpaid regulatory dues after Supreme Court ruled on October 24 in favour of the Department of Telecommunications' (DoT) definition of adjusted gross revenue (AGR).

"This led to DoT's demand that Bharti pays unpaid dues on licence fees of three billion dollars. There may be another potential demand of 2.9 billion dollars in regard to unpaid dues on spectrum usage charges," Fitch added.

The rating agency also put Bharti and Bharti Airtel International (Netherlands) BV's senior unsecured bonds and Network i2i's subordinated perpetual bonds on RWN.

The resolution of RWN, which may take more than six months, requires clarity on the exact amount and timing of the payment of unpaid dues and whether the government will provide any financial relief to the telecom sector affected by the court ruling, Fitch added.

On the other hand, Care Ratings downgraded Vodafone Idea's long-term bank facilities and non-convertible debentures to Care A-minus with negative implications.

The move is on account of Supreme Court ruling on the AGR matter and also an extension of long stop date from October 24 to December 24 for the sale of Indus Tower stake to Bharti lnfratel.

The downgrades follow Cellular Operators Association of India (COAI) saying the apex court's decision will negatively impact incumbent operators by over Rs 92,000 crore.

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