What Securities can Telecom Offer to Clear their AGR Dues?

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What Securities can Telecom Offer to Clear their AGR Dues?

Telecom operators, including Vodafone, Idea, and Bharti Airtel, are reportedly planning to offer license, spectrum, and tangible net assets and tax refunds as security to guarantee AGR payment.

In the hearing conducted on the matter of AGR a week before, the Supreme Court ordered the telecom operators to file a reply in which they had to explain the roadmap, timeline, and security associated with AGR payment. The Department of Telecommunication(DOT) discussed this in response to the plea, allowing telecom consultant to file their AGR dues in a staggered manner over 20 years.

In its comments, the supreme court cannot accept such a staggered payment schedule until the telecom operators have a detailed schedule or security.

A source is quoted stating that “Telecom operators are currently assessing the values of their tangible assets. AS these asses will play a sizeable role in paying the security the Supreme Court has asked from them.”

Even after some clarity on how to move forward with the AGR dues, the troubles of the telecom operators are far from over. While the National Company Law Appellate Tribunal ruled in favor of qualifying spectrum as an asset, the telecommunication department has contested that hearing. Therefore, the full and final decision of whether the spectrum can be considered assets rests with the Supreme Court.

Security payment via assets other than spectrum

The two telecom operators – Vodafone Idea and Bharati Airtel – can dip into the tax refunds, increasing to INR 35,000 Crore. Furthermore, there is a chance of additional funds from the pending public sector units that mount up to INR 20 thousand Crore. With these two seemingly infallible sources, there is a chance that the two telecom operators will see the light at the end of their AGR tunnel.

Also Read: Impact of the New AGR Dues Norms on the Telecom Industry 

The telecom operators can’t provide the guarantee or security for that matter.

Even though the supreme court – upon the plea hearing of the department of telecommunication (DOT) – has ordered the telcos to submit a guarantee, it is complex. A source has said that banks have already been exposed to the telecom operators that they might not want to provide further guarantees. Furthermore, there is another paradoxical matter – one has to submit the security of 70%-90% of the loan payment to get access to that loan – which is a significant issue as the pandemic has put a damper on much of businesses and has put the country on the backburner.

Thus, Vodafone did a pre-emptive strike and stated that it couldn’t provide a guarantee.

Conclusion

There is still a lot to be said about telecom industries unable to pay their dues and the stubborn Department of Telecommunication who, all of a sudden, stated that these industries misinterpreted AGR Dues. But, for now, the conditions that telcos face are so bad that they are considering spectrum, license, and tax refunds as AGR. We can’t say who is in the right or wrong here, but we can say this, the Department of Telecommunication is the same department that grants you your OSP License. So, make sure that you file your annual returns on time and with the aid of experts because who knows when the department will ask you for something unreasonable.

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