NEW DELHI: Vodafone Idea (VIL), once India’s largest telecom service provider, stands on a cliff edge. On one side is relative safety, a chance to shrug off recent misfortunes and consolidate its not-inconsiderable resources. On the other is a precipice, and a swift, near-certain descent into insolvency.
VIL has stood here for months now, but Judgement Day (quite literally) is set to arrive within the week. If things go as expected, the Supreme Court Bench hearing the crucial AGR liabilities case will deliver its verdict before September 2—when one of the judges, Justice Arun Mishra, will retire.
The question: Should license holders such as Bharti Airtel and Vodafone Idea be allowed more time to pay off their remaining dues? It will also decide on whether companies that took over spectrum assets from bankrupt firms are liable for the dues of the latter. But, this is rather less important for VIL than for rivals Airtel and Reliance Jio, who may end up having to pay a portion of dues owed by Reliance Communications, Aircel, and Videocon Telecommunications.
For VIL, the problem is cash. In that, it doesn’t have much. Both promoters— the Aditya Birla Group and Vodafone Plc—had long ago ruled out any chance of capital infusion; and VIL’s cash chest had just about Rs 3,450 crore as of June, 2020. Rather puny beside Rs 50,400-odd crore, which is what it currently owes the Department of Telecom (DoT). Its liabilities had started out larger, but it has paid up Rs 7,854 crore over the past few months.
If the SC decides to allow the government to implement a staggered payment schedule spanning 10 or 15 years (the Bench shot down the original plea for a 20-year timeframe), VIL will have been granted a thin, but sure, lifeline. Thin, because it would still have to cough up an annual Rs 5,900 crore 15 years at 8% interest) or Rs 7,500 crore (10 years). Despite already haemorrhaging subscribers, analysts note that it would have no choice but to raise prices sharply.
A difficult proposition, especially since both rivals—Airtel and Jio—are in far better financial shape. But, if the SC decides to call in the dues in one shot, as it had initially done last year, the proposition before VIL may become impossible.
Rs 3,450 cr
Vodafone-Idea’s cash chest as of June 2020. It has paid up Rs 7,854 crore as AGR dues over the last few months
Rs 215 cr
Total annual payout for AGR dues to DoT by Vodafone Idea over 15 years
Rs 130 cr
Total annual payout for AGR dues by Bharti Airtel over 15 years, according to official data
