CHENNAI: In a major blow to telecom service providers, the Supreme Court on Friday dismissed all petitions seeking permission to allow the Department of Telecommunications (DoT) to fix alleged errors in its calculations of Aggregate Gross Revenue (AGR) dues. The decision is a particularly major blow for Vodafone Idea Ltd (VIL) which faces over Rs 20,000 crore in cumulative cash outgo within a year, but had just Rs 350 crore in cash and cash equivalents as of the end of March 31, 2021.
According to the SC's earlier directions, Bharti Airtel and Vodafone Idea have to pay over Rs 43,000 crore and Rs 58,000 crore respectively towards AGR dues and penalties, with the payments to be made in annual instalments over a 10-year period. Telcos have to make their annual payments for this year by March 31, 2022.
Telecom companies, however, have questioned the DoT's calculations. In petitions that have now been dismissed by the SC, Bharti Airtel, Vodafone Idea, and the Tata group had argued that there were "arithmetic errors" in DoT's calculations that needed to be fixed. While Airtel had estimated its dues at around Rs 18,000 crore, Vodafone Idea had pegged its liabilities at around Rs 25,000 crore.
Vodafone Idea in trouble
The SC's decision to not recalculate dues is a major blow for the liable companies, but particularly so for Vodafone Idea, which is struggling with a serious shortage of cash.
According to its financial results for FY21, its cash and cash equivalents stood at a meagre Rs 350.3 crore. Set against that is a gross debt of Rs 1.803 lakh crore as of March 31, 2021—of which Rs 96,270 crore comprises deferred spectrum obligations and Rs 60,960 crore that it has to account towards AGR dues payments over a ten-year timeframe. It also has debt worth Rs 23,080 crore from banks and financial institutions.
VIL also says that due to a ratings downgrade, “certain lenders (have) asked for increase of interest rates and additional margin money/security against existing facilities”, and that it “continues to be in discussion with the lenders for the next steps/waivers”.
Against this bleak backdrop, VIL has substantial payments coming due from December this year. Existing debt of Rs 8,045.4 crore and the next AGR instalment (of around Rs 9,000 crore) is payable by March 31, 2022; a spectrum payment installment of Rs 8,211.7 crore is payable by April 9, 2022; and bank guarantees worth Rs 7,039.9 crore are due to expire in the next twelve months.
According to analysts at Goldman Sachs, at its current earnings rate, “the company could have a Rs 23,400 crore cash shortfall until April 2022”. With its debt levels high and cash low, CLSA says that “it is headed for financial crisis when annual payments come due”.
On Thursday, VIL received government approval to raise FDI worth Rs 15,000 crore, but sources say that no funding deal has been finalised. The company's management had said after releasing its FY21 results last month that it was confident that it will secure funding in the next few weeks.