The government is waiting for the Supreme Court’s written order before deciding on any relief measures for Vodafone Idea Ltd, two officials said. Based on the order, the government will determine whether the relief will apply solely to Vodafone Idea or extend to the entire telecom sector.
“We are waiting for the Supreme Court order which is yet to be issued. The order fine prints will guide us on the direction we need to take on any possible relief,” one of the two officials said.
SC opens policy window
In a relief for Vodafone Idea, the Supreme Court on 27 October allowed a reassessment of the telecom department’s demand for adjusted gross revenue (AGR) dues from Vodafone Idea. The court also allowed the government to address the grievances of the beleaguered telecom operator without its intervention.
The bench of Chief Justice B.R. Gavai and Justice K. Vinod Chandran observed that a decision on any relief to the telecom operator was a policy matter. The government has a 49% stake in Vodafone Idea.
“We see no impediment in the interest of the Union of India reconsidering the issue and taking appropriate decision in law,” the bench observed.
The court is yet to issue its written order.
Vodafone Idea’s petition and dues
Vodafone Idea filed a petition before the Supreme Court last month challenging the Department of Telecom’s demand for an additional ₹9,450 crore in AGR dues. The company also sought a waiver on interest and penalties, arguing that the disputed components of the dues had not been finalised.
The Supreme Court’s verdict now paves the way for the struggling telecom operator to receive much-needed financial relief, easing concerns about its continued survival.
“Vodafone Idea will also have to send a communication to the government on the relief it expects once the Supreme Court order comes in,” the second official said, on the condition of anonymity. The official added the extent of any relief to be given will be based on the internal discussions and looking at the Court order.
Vodafone Idea already owes around ₹83,400 crore in AGR dues to the government, with annual payments of ₹18,000 crore starting March. Including penalties and interest, its total liabilities to the government are estimated at around ₹2 trillion.
Vodafone Idea has previously said that its cash flows were insufficient to pay the dues that have mounted over the years. Vodafone Idea’s former chief executive Akshaya Moondra said in August that early resolution of the AGR dispute was critical for the telecom operator to secure bank funding.
The telecom operator has asked the Supreme Court to quash DoT’s additional demands for FY17 and earlier, and order a comprehensive reassessment and reconciliation of all AGR dues for that period.
It warned that the hefty liability threatened its survival and “the livelihood of thousands of employees working directly or indirectly” with the company. Vodafone Idea serves about 198 million subscribers and employs over 18,000 people.
“We look forward to working closely with the department of telecommunications to resolve this matter in the interests of our nearly 200 million subscribers,” Vodafone Idea had said in an exchange filing on 27 October. “This is an impetus to the Digital India vision,” it said.
Expert view
“It’s difficult to gauge the implications until the Supreme Court issues its written order. The key question is how the court balances any reconsideration with the sanctity of its 2020 judgment—unless that verdict is expressly overturned,” said Parag Kar, an independent telecom analyst. “If substantial relief is granted, the rationale should become clear in the written order.”
However, such relief would logically need to apply to Bharti Airtel and others as well, potentially requiring the government to refund certain amounts to Bharti if a full reassessment and waiver of interest and penalties are allowed, Kar added.
Analysts at brokerage Emkay Global said the government will now have enough wiggle room to create a plan for Vodafone Idea’s long-term sustainability.
“We note that leverage for VI remains higher even without AGR dues, and the government will need to consider plans toward reducing the spectrum debt as well,” Emkay Global said in a note dated 27 October.
The brokerage house sees a low chance of the government reversing the current outstanding ₹37,100 crore AGR dues of Bharti Airtel.
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