What a Rs 92,000 cr bill means for Jio, Airtel & Voda Idea

Kolkata & New Delhi: The Supreme Court’s judgement on Thursday backing the government’s definition of adjusted gross revenue (AGR) may hasten further consolidation, paving the way for a two-operator telecom market, comprising Reliance Jio and Bharti Airtel, with Vodafone Idea’s very survival at stake, analysts said.This, they said, is since Voda Idea’s total licence fee outstandings (including interest and penalties) to the government is at around a staggering $4 billion, which is well above its current $3 billion cash reserves and its modest Rs 12,442.42 crore market capitalisation.Rajiv Sharma, head of research at SBICap Securities, said the SC verdict, if implemented, could lead to Jio and Airtel emerging as the two dominant national telcos, implying “Vodafone Idea's survival could face big challenges, given that its $4 billion dues to DoT is over and above its (existing) $14 billion net debt ”.Bank of America-Merrill Lynch backed the view, saying “the question remains how Vodafone Idea will fund this payment,” adding that the apex court decision would lead to “material downside risks to the company,” and further “weaken the telecom sector with the prospect of increased gearing”.According to the DoT, Airtel owes it Rs 21,682.13 crore as licence fees (including interest & penalties) while Vodafone Idea owes Rs 28,308.73 crore. The licence fee is computed as a percentage of AGR—conventionally the revenue telcos earn from licenced mobile services.Sharma of SBICap Securities though said Bharti Airtel won’t need to shoulder the licence fee outstandings of either Telenor India (Rs 1,950.11 crore) or Tata Teleservices (Rs9,987.04 crore) as “it is indemnified by both the companies for their respective past dues”. Sunil Mittal-led Airtel has acquired Telenor’s India unit, while it is awaiting DoT approval for acquiring Tata Tele’s mobility business.Analysts said Airtel and Voda Idea haven’t provisioned for clearing these licence fee outstandings to the government, but have instead treated them as contingent liabilities in their books, implying these are not accounted as future payables in the form of debt/liabilities.“Airtel and Voda Idea have not created any provisions against these liabilities, and any payments, if (they) arise will put an additional strain on their already stretched balance sheets,” ICICI Securities said in a recent note, seen by ET. It added that Airtel and Voda Idea had “recorded contingent liabilities from DoT of Rs 9,800 crore and Rs 9,400 crore, respectively”.Airtel shares plunged nearly 10% in intra-day trade after the apex court order came in, but recovered lost ground to close 3.31% higher at Rs372.45 on BSE amid talk of the likely emergences of a two-player telecom turf. Untitled Carousel 71749373 71749343 71743129 71721591

from Economic Times https://ift.tt/3449vns