For Vodafone Idea, the current dues amount to over Rs 50,000 crore, if paid as a lumpsum amount.
The Supreme Court, on October 24, had ordered telecom companies to pay a hefty sum of Rs 1.47 trillion by dismissing their plea challenging the definition and applicability of adjusted gross revenue (AGR) and ordered the payment to be made within 90 days of the order.
The 90-day interval expired recently on January 24 and throughout this duration, the telecom sector saw various situations that seemed to be taken right from a story book. While Reliance Jio silently obliged to the order, the trio of Bharti Airtel, Vodafone Idea and Tata group went all guns blazing to initially object to the AGR dues and later to request a change to the payment deadline.
For Vodafone Idea, the current dues amount to over Rs 50,000 crore, if paid as a lump sum amount. For the company, that has already been skating on thin ice since the merger stated, this would imply that it would have to shut its operations altogether. If this happens, it would have a domino effect. One of the big creditors for Vodafone Idea is Yes Bank which is already suffering due to bad loans.
A similar situation can be seen for Bharti Airtel, which had also recently raised $2 billion (Rs 14,400 crore) through a QIP and another $1 billion (Rs 7,200 crore) through FCCBs. Thus, a government's non-intervention and assistance to these telecom giants might lead to the financial ecosystem becoming more vulnerable.
Meanwhile, Reliance Jio, whose dues were almost Rs 170 crore, has adhered to the deadlines set by the order.
The Department of Telecommunications had initially mentioned how it would diligently follow the orders given by the Supreme Court and a non-payment by the companies would mean that the department would issue notices to the telcos. However, in light of the Modified Application moved before the Apex Court by the telecom operators on Monday, the department has decided to hold out on any further action until the hearing for the application has taken place sometime during the coming week.
Finance Minister Nirmala Sitharaman at one of her earlier addresses in this regard had mentioned how she does not want any company shutting down and would be trying to bring in changes and measures to help in situations like this. Considering the same, all eyes are now on the government and the hearing scheduled this week.
With the Budget around the corner, and the government looking towards damage control for the economy, one can hope that there might be a decision that may favour the telecom operators in some manner.
(The author is Head of Research at CapitalVia Global Research Limited- Investment Advisor.)
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