NEW DELHI: While the Supreme Court has reserved its order on the crucial question of an extended AGR dues payment schedule, its remarks during Monday’s hearing makes it clear that telcos are highly unlikely to wrangle a 20-year extension.
In fact, the bench prodded the legal counsels of Vodafone Idea, Bharti Airtel, and the Tata group to provide more “reasonable” timeframes. While the Tatas proposed 7-10 years, the other parties inclined toward a 15-year period.
Even if the SC grants 15 years to pay up their liabilities, this will significantly increase telcos’ financial burden. The three firms still have to pay over Rs 80,000 crore in total. According analysts at Motilal Oswal, this would likely force the telcos to hike tariffs sharply. Considering its financial condition, Vodafone Idea may have to increase its prices by as much as 73 per cent.
“Bharti/VIL would require to pay an annual amount of Rs 2,600 crore/Rs 5,100 crore, if the SC grants a time frame of 20 years. This amount would increase to Rs 3,000 crore/Rs 5,900 crore with a repayment period of 15 years. and to Rs 3,900 crore/Rs 7,500 crore on a 10-year schedule,” the analysts noted.
This puts Vodafone Idea in a difficult place. It would require to hike its Average Revenue Per User to rise by Rs 84 to enable it to achieve an EBIDTA of Rs 30,000 crore by FY22—the amount it would need to service obligations like: Rs 16,500 crore deferred spectrum liability, Rs 5,100 crore annual AGR payment, cash interest cost of Rs 3,000 crore to lenders, and capex of around Rs 5,300 crore.