Vodafone Idea shares jump 10%, telecom stocks surge as reports say Centre mulling waiver of substantial portion of AGR dues

Even with the recent rally, Vodafone Idea shares have lost 30 percent of their value over the past 12 month.

Shares of beleaguered telecom operator Vodafone Idea Ltd. shot up to the 10 percent upper circuit in the early session on January 20, as Moneycontrol reported that the Centre might weigh a substantial portion of adjusted gross revenue (AGR) dues imposed on companies like Vodafone Idea and Bharti Airtel after the Supreme Court's 2019 verdict.

At 9.35 am, shares of Vodafone Idea were quoting Rs 10.02, higher by 10 percent on the NSE. The BSE Telecom index gained around 1.5 percent in trade, as other telecom stocks shared the optimism.

The source revealed that the Department of Telecommunications (DoT) has conducted multiple meetings with telecom operators, including Vodafone Idea, during which the telcos highlighted their financial strain.

The proposal reportedly includes waiving 50 percent of interest and 100 percent of penalties and interest on penalties. If finalised, it could result in over Rs 1 lakh crore in financial relief for telecom operators, with over half benefiting Vodafone Idea (Vi), which is grappling with severe financial distress.

Under this framework, Vi's AGR dues could be reduced by over Rs 52,000 crore and Bharti Airtel’s dues could drop by nearly Rs 38,000 crore. Tata Teleservices could see a reduction of around Rs 14,000 crore.

Among the key issues for government officials to contend would be the matter of relinquishing of public funds, as well as the need for approvals at multiple levels, people familiar with the development informed CNBC-TV18.

In a report, JM FIinancial said, "Though the government intends to ensure a ‘3+1’ player market, Telecom Act, 2023 doesn’t explicitly empower the government to waive off the telcos’ dues. Hence, unless it amends the Telecom Act or comes out with any other legislative or executive measures, we believe the government cannot waive off the AGR liability decided by the SC."

"Therefore, telcos were pleading with the SC for AGR relief since the last 4 years despite the government agreeing that the SC’s AGR decision is detrimental to its objective of having three healthy private telcos. Hence we believe the government might mostly agree to extend this

4-year moratorium (which ends in September 2025) on payment of AGR/spectrum dues (but it has to be NPV neutral) or convert dues into equity," it added.

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Vodafone Idea remains entangled in the adjusted gross revenue (AGR) controversy. In September, the Supreme Court dismissed petitions from 19 telcos, including Vodafone Idea and Airtel, seeking to recalculate their AGR dues—a setback that continues to weigh heavily on the cash-strapped company.

Last month, Vodafone shares rallied as the government waived bank guarantees for past spectrum auctions.  The telecom firm has been exempted from providing bank guarantees worth Rs 24,800 crore for spectrum auctions held before 2021 (2012, 2014, 2015, 2016). In a December 28 filing, the company termed the government reform as a "big relief for telecom companies".

The company added that prior to this reform, bank guarantees aggregating to Rs 24,800 crore were required to be provided by the company against each spectrum instalment, 13 months prior to the installment falling due for the above auctions. But now, as per their understanding, out of all the 5 auctions, no bank guarantees will be required to be provided by the company for the 2012, 2014, 2016 and 2021 auctions.

Even with the recent rally, Vodafone Idea shares have lost 30 percent of their value over the past 12 months, reflecting investor concerns over the company’s ongoing financial challenges and future growth prospects.

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