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. This was discussed in response to the plea that Department of Telecommunication or DOT filed allowing telecom operators to file their AGR dues in a staggered manner over the course of 20 years.
In its comments, the Supreme Court cleared that such staggered payment schedule cannot be accepted until there is a clear schedule or security by the telecom operators.
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.”
It seems that even after some clarity of 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 favour of qualifying spectrum as an asset, Department of telecommunication has contested that hearing. Therefore, the full and final decision of whether spectrum can be considered assets rests with the Supreme Court.
Security payment via assets other than spectrum
Apparently, the two telecom operators – Vodafone Idea and Bharati Airtel – can dip into the tax refunds, with the amount mounting up 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 light at the end of their AGR tunnel.
The telecom operators can’t provide the guarantee, or security for that matter
Even though the supreme court – upon the plea hearing of Department of telecommunication (DOT) – has ordered the telcos to submit a guarantee, it is difficult as of how. A source has sad that banks have already been exposed so much 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 actually get access to that loan – which is a major issue as the pandemic has put a damper on much of the businesses and has put the country on backburner.
Thus, Vodafone did a pre-emptive strike and stated that it can’t provide a guarantee.
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. 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 the wrong here, but we can say this, 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 asks you for something unreasonable.