Shocking! Vodafone Comes Close To Bankruptcy Over Rs 1.47 Lakh Cr AGR Dues; SC Refuses Any Relief

Vodafone Idea is on the verge of bankruptcy as it struggles to clear Adjusted Gross Revenue (AGR) dues. Last week the Supreme Court hit all the telecom companies hard for failing to clear dues.

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Brewing Trouble for Vodafone!

Vodafone Idea Ltd, is a joint venture between Vodafone Group Plc and India’s Idea Cellular.

The merged company has been affected the most by the Supreme Court’s order asking the telecom companies to clear their AGR dues. It has to pay the biggest share of dues among all three telecom companies amounting to a total of Rs 1.47 lakh crore to the Government of India.

The mobile carrier’s total accountability is estimated to be around Rs 53,038 crore comprising of Rs 24,729 crore in spectrum dues and Rs 28,309 crore in licence fees. Apart from the  AGR dues, Vodafone Idea’s gross debt, excluding lease liabilities, was Rs 1,15,850 crore as on December 31, 2019, including deferred spectrum payment obligations of Rs 88,530 crore due to the government.

The company clearly mentioned that the continuation of its business in India will depend on “favourable order” on its modification plea filed before the top court. The company’s further operational business will depend on whether the timeline for clearing dues can be extended. 

A few days ago the telecom company said it is “assessing” the amount that can be paid towards AGR dues. On Monday February 17, the company made a part payment of Rs 2,500 crore towards AGR dues and committed to paying another Rs 1,000 crore before the end of this week.

The company said in the stock exchange filing, “As disclosed in the company’s financial statements for the quarter ending December 31, 2019, the company’s ability to continue as a going the concern is essentially dependent on a positive outcome of the application for modification of the Supplementary Order.” 

Vodafone Stuck in a Trench!

Last week the Supreme Court rejected the plea by mobile carriers such as Bharti Airtel and Vodafone Idea Ltd for extension in the payment timeline and asked them to deposit an estimated Rs 1.47 lakh crore in past dues for spectrum and licences. 

The Supreme Court also threatened to initiate contempt proceedings against top executives of these companies for non-payment. Of the estimated dues that include interest and penalty for late payments, Airtel and Vodafone Idea owe about 60 per cent. 

After the maiden payment by Vodafone Idea, senior advocate Mukul Rohatgi, representing Vodafone Idea, urged the top court not to take any coercive action against the telecom operator after the initial payment was made yesterday. 

However, the Supreme Court rejected the plea and made room for the Department of Telecommunication (DoT) to take coercive action including encashment of the bank guarantees wherein financial bank guarantee is equal to two quarters of licence fee and other dues. This amount could be in the range of Rs 5,000 crore for Airtel and Vodafone Idea.

Airtel has paid Rs 10,000 crore of its Rs 35,586 crore dues and  has promised to clear all its dues before the next date of hearing in the case on March 17. However, no news has come in from Vodafone about the payment of further dues.

Vodafone Idea’s bankruptcy could have a massive negative impact on the Indian economy.

Jio and Airtel’s Future Might Be Bright!

If Vodafone Idea fails to pay the AGR dues, there will be just two telecom companies left in India- Bharti Airtel and Reliance Jio.

Following this, the remaining mobile carriers are expected to benefit in the long run by absorbing customers of Vodafone Idea.