Press "Enter" to skip to content

AGR, spectrum moratorium to help Vodafone Idea defer Rs 96,000-crore payouts, avoid bankruptcy: Analysts –

Kolkata & Mumbai: The four-year moratorium on statutory payouts towards adjusted gross revenue (AGR) and spectrum dues will allow Vodafone Idea defer payments to the tune of Rs 96,000 crore, helping its cash flows and possibly boosting its survival chances significantly, analysts said.

They, though, cautioned that despite the four-year deferment of statutory payouts, the financial challenges of the telecom JV between UK’s Vodafone Plc and India’s Aditya Birla Group, are not over as accrued interest during the four-year moratorium span would further add to the telco’s huge Rs 1.9-lakh crore debt.

The situation, they said, could improve materially if Vi is able to leverage the latest relief measures and close its much delayed Rs 25,000-crore fundraise, use a sizable chunk of the proceeds in ramping up its 4G networks to rein in customer losses and compete more effectively with stronger adversaries, Reliance Jio and Bharti Airtel.

“The four-year moratorium on statutory payments definitely allows Vi to survive and avoid a bankruptcy as it promises relief on the cash flows front,” Nitin Soni, senior director at global ratings agency, Fitch, told ET.

Vi shares closed nearly 2.8% higher at Rs 8.93 on BSE on Wednesday.

The company’s promoters said the relief measures would ensure healthy growth and go a long way in unshackling the telecom sector.

Vi needed immediate relief to survive as it has been reeling under Rs 1.9 lakh-crore of debt, of which as much as Rs 1.6 lakh crore must be paid to the government. The company has been unable to raise funds to mitigate the crisis and has been losing customers in droves every quarter.

An analyst at a leading global brokerage, who did not wish to be identified, said “the four-year moratorium on statutory payments would allow Vi to defer around Rs 36,000 crore in AGR payouts and Rs 60,000 crore of deferred spectrum liabilities till FY26, although the telco would need to book interest that will accrue from this year onwards at MCLR (marginal cost lending rate) + 2%, amounting to roughly 8%, which will add to its debt”.

In its June quarter earnings report, Vi’s net debt stood at Rs. 1.91 lakh-crore, comprising deferred spectrum payment obligations of Rs 1.06 lakh crore and AGR liability of Rs 62,180 crore due to the government, and debt from banks and financial institutions of Rs 23,400 crore. The telco’s cash and cash equivalents were at Rs 920 crore.

Fitch’s Soni, though, said “the latest relief measures won’t improve Vi’s overall business profile” as the four-year moratorium isn’t a waiver but a temporary deferment, and its financial challenges will linger if the company is unable to raise cash quickly and put enough money into capex and also raise tariffs sharply. This, he said, since Vi continues to steadily lose customers every quarter and its cash generation remains insufficient to even meet quarterly interest payouts.


Experts welcome the bold measures announced by the Cabinet on Wednesday.

Despite trying for nearly a year, Vi has failed to conclude its planned Rs 25,000-crore fundraising plan.

Analysts and industry experts are upbeat about the overall direction of the telecom reforms package cleared by the Cabinet, which they said would reduce regulatory uncertainty in a sector mired by acute financial stress, high debt and low return on investments.

“The savings in the cash flows will boost the telecom sector and pave the way for 5G auctions in India. The government is clearly committed to a speedy roll out of next generation services in India through 100% FDI and through self-declaration route for tower’s roll out,” Peeyush Vaish, telecom sector leader at Deloitte India, said.

Sameer Chugh, partner, Cyril Amarchand Mangaldas, added that the reforms will ensure survival of players to maintain healthy competition for the benefit of the customers.

“The removal of non-telecom revenues from the definition of AGR and the removal of penalty is a much-needed change that has been brought in. This extra burden has hurt the telecom industry in the past and will now pave the way for telecom players to make higher capital investments.”


The Cabinet on Wednesday announced a telecom relief package including a change in the definition of contentious Adjusted Gross Revenues (AGR), moratorium with interest rates for four years.