SC's AGR order to push telcos to raise tariffs: Acuite Ratings

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SME Times News Bureau | 14 Feb, 2020
The Supreme Court order on Friday directing telecom companies to settle their AGR dues by March 16 will create uncertainty on their operational sustainability, especially on Vodafone Idea, which will push them to raise tariffs by 20-25% to remain afloat, Acuite Ratings & Research Limited has said.

"The SC order directing the telecom companies to settle the pending AGR dues by March 17 puts further uncertainty on their operational sustainability, particularly that of Vodafone Idea. The latter's ability to pay an amount of over Rs 55,000 Cr by the stipulated date is uncertain given its current financial flexibility," said Suman Chowdhury, President, Acuite Ratings.

Airtel needs to pay an amount of Rs, 35,500 crore while it has been able to raise funds in the recent past. "Acuite expects telecom tariffs to rise further by at least 20%-25% in the near to medium term to support the payments of such large dues to DoT," said Chowdhury.

The telcos have already effected one round of tariff hike in December.

The Supreme Court on Friday blasted telcos for not paying AGR dues and demanded that they pay "sizeable" dues by Friday. Vodafone-Idea, Airtel and other telcos owe Rs 1.47 lakh crore to the Department of Telecom.

This is a big blow to the telcos, especially Vodafone Idea whose stocks slumped by 15% on the BSE. The court on Friday demanded that the telecom department withdraw its executive order overriding the court order to recover the dues.

The latest directions may force Vodafone Idea and Bharti Airtel to part-pay their respective dues of over Rs 53,000 crore and Rs 35,500 crore immediately.

Vodafone Idea had said its survival is in question if there is no relief from the Supreme Court. Vodafone Idea on Thursday reported widening of losses to Rs 6,438.8 crore in October-December 2019 against Rs 5,004.6 crore in the year-ago period as the AGR (adjusted gross revenue) dues-hit telco reeled under the impact of increased finance costs and higher depreciation of assets.

Among the telcos, Bharti Airtel is best positioned at present to meet obligations after raising $3 billion through a combination of qualified institutional equity placement (QIP) and convertible bond offerings.