Vodafone Idea stock surges on reports of government’s telecom relief package extending AGR payment timeframe to 20 years

Vodafone Idea stock surges on reports of government’s telecom relief package extending AGR payment timeframe to 20 years
Vodafone Idea needs more than hopes and prayer to stay aliveBCCL
  • The Indian government’s telecom relief package could give Vodafone Idea and its shareholders something to look forward to.
  • This package could consist of a relief measure that overrides the Supreme Court’s AGR dues judgment, which also signals the government’s intent on helping the ailing telecom industry.
  • While Vodafone Idea might get some much-needed help from this measure, it could be a bonanza for its rival, Airtel.
Shareholders of Vodafone Idea may yet get to breathe a sigh of relief as the Indian government is preparing the highly anticipated telecom relief package, doubling the adjusted gross revenue (AGR) dues payment timeframe to 20 years from 10 years.

The company’s stock surged by over 4% as of 2:00 p.m., on August 23, after a report by The Ken stated that the government intends to pass an ordinance to increase the AGR dues payment timeframe.

The company’s shares closed up nearly 1% at the end of the trade today.

Vodafone Idea stock surges on reports of government’s telecom relief package extending AGR payment timeframe to 20 years
Vodafone Idea share priceBSE / Business Insider India / Flourish

The report quotes an unnamed source stating that the government is exploring this possibility at the moment.

It is worth noting that the Department of Telecommunications (DoT) had advocated for a 20-year repayment timeline in July last year, during the final submissions in the AGR dues case. Telcos, on the other hand, were fine with a 15-year repayment schedule.

However, the Supreme Court stuck to its stance of a 10-year timeframe, leaving the government, and the telcos’ requests unrequited.

To nullify this and help the ailing telecom sector, the government could go the ordinance route, the report added, quoting an unnamed source.

Business Insider has reached out to the government and the Department of Telecom for a statement.

Here’s how much Vodafone Idea and Airtel owe the government in the form of AGR dues:

CompanyBalance AGR duesAnnual payment (10-year timeline)Annual payment (20-year timeline)
Vodafone Idea₹50,339 crore₹5,034 crore₹2,517 crore
Airtel₹25,976 crore₹2,598 crore₹1,299 crore

The government also has the option to reduce the interest rate on AGR dues, but it is an option and not a certainty at the moment.

The recently-passed Constitution (105th) Amendment Bill, 2021 is an example of the Indian government moving to nullify a Supreme Court judgement. This lends weight to the suggestion that the government could do the same with the AGR dues judgment passed last year, and pass it off as a part of its telecom relief package.

The problem with changing the terms of AGR dues payment

In his SOS message to the government, Kumar Mangalam Birla highlighted three issues that need to be addressed in order to save Vodafone – clarity on adjusted gross revenue (AGR) dues, moratorium on spectrum payments, and a floor pricing regime above the cost of service.

Former secretary of Telecom and Information Technology (IT), R Chandrashekhar explained that these requests are not viable. In the case of AGR dues, the Supreme Court order leaves the government with no flexibility. The moratorium on spectrum payments would require changing the terms agreed to by the operators, and offering support only to one telco is impossible.

If the government extends the 20-year AGR dues payment timeframe to Airtel and other telcos as well, this would be a bonanza for them.

All in all, the decks are stacked against Vodafone Idea, and the government, with very little room to wiggle for either of them.


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