Vodafone Idea postpones payment of additional Rs 8,837 crore AGR dues

Vodafone Idea has decided to defer an additional adjusted gross income (AGR) levy of Rs 8,837 crore from a period of four years and benefit from the government’s four-year moratorium on such payments. The dues relate to fiscal years 2018 and 2019, which were not covered by the Supreme Court’s October 2019 order, under which telecom operators had to pay the dues.

Previously, the company took advantage of the four-year moratorium on AGR dues until FY17, as the Department of Telecommunications (DoT) calculated dues up to that date when the matter was heard by SC.Till FY17, Vodafone Idea AGR dues as calculated by the DoT stood at Rs 58,254 crore. Of this amount, the company had paid Rs 7,854 crore and the balance becomes payable in 20 installments, after the end of the four-year moratorium.

The company said in a regulatory filing that its board had approved the decision to apply a moratorium on the additional Rs 8,837 crore after the DoT sent a notice of formal notice for the 2018 and 2019 financial years. Vodafone Idea also said the amount would be revised upon reconciliation with the DoT.

The company has not decided at this stage whether it will opt for the government’s provision converting the interest due on the additional amount into equity. Since the amount is lower, the company may choose to pay the interest and not opt ​​for the equity conversion. A similar notice of formal notice for the balance of AGR dues has also been issued against Bharti Airtel. Although the amount is not known, it would be lower than that of Vodafone Idea. It is unclear whether Bharti has elected to avail itself of a moratorium on the additional amount.

AGR fees had arisen as part of the payment of license fees and spectrum usage fees. The telecommunications operators had deducted certain revenues to calculate the AGR because they felt that they were not part of the telecommunications services. However, their claim was challenged by the DoT, which won the case before the SC. On Wednesday, Vodafone Idea also approved a fundraising of up to Rs 436.21 crore from Euro Pacific Securities, which is an entity of Vodafone Group and promoter of the company, on a preferential basis.

The board also approved the convening of an extraordinary general meeting on July 15, in order to seek shareholder approval for the aforementioned preferential issue. The promoters of VIL (Vodafone Group and Aditya Birla Group) had infused Rs 4,500 crore into the business in March. With this infusion, the promoters infusion would be up to Rs 4,936 crore.

The company had announced a fundraising exercise of Rs 25,000 crore, of which Rs 5,000 crore would come from developers while the remaining Rs 20,000 crore would come from lenders and investors. VIL’s fundraising efforts have been accelerated as the government will soon approve the conversion of its debt into company shares. This will help the financially-struggling telecom operator carry out its targeted fundraising exercise of Rs 25,000 crore. It will also help it participate in the upcoming 5G spectrum auction.

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Elaine R. Knight