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SC rarely accepts curative petitions: Motilal Oswal
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SME Times News Bureau | 17 Jan, 2020
Curative petitions like that being contemplated by the telecom companies
have rarely been accepted by the Supreme Court, brokerage firm Motilal
Oswal said on Friday.
"Both Bharti and VIL (Vodafone Idea Ltd)
indicated that they are exploring filing a curative petition in the SC,
wherein it has to be proved that the decision would have a humanitarian
impact and also severe repercussions on GDP, given the importance of the
sectorhave been rarely accepted by the SC," a Motilal Oswal note said.
Besides,
other non-telecom public sector undertakings (PSUs) have liabilities of
over Rs 3 trillion "the payment for which is still questionable - and
they may have to file a review petition", it added
The brokerage
said that it won't be surprising if the government comes to the rescue
of the telecom sector. This is particularly because it has to recover Rs
900 billion as deferred spectrum debt from VIL, which has said it will
be forced to shut operations if asked to pay the entire adjusted gross
revenue (AGR) liability.
Also, VIL owes Rs 300 billion to banks.
Against this, the Aditya Birla Group and Vodafone Plc's stake in VIL
stands at a mere Rs 70 billion and Rs 80 billion, respectively.
"Moreover,
the implication on end-customer in the advent of VIL shutdown could be
terrible. In such a scenario, we believe that the government may look to
exercise other options, including -- it may provide an AGR liability
extension or moratorium on the same lines as spectrum payment liability
to resolve near-term cash flow issues," the note said.
According
to the note, the Department of telecom (DoT) could consider waiving off
penalties and interest on penalties before 2011 since first decision of
the apex court on AGR liability came in 2011. In such case, 40 per cent
of the AGR payments could go off.
This, however, will be in
contrast to the government's statement in Parliament that it will not
provide any relief toward AGR liabilities.
Motilal Oswal said
that GST input credit of Rs 80 billion and Rs 90 billion for Bharti and
VIL, respectively are also being explored, but it could be a long-drawn
process given the need for the GST Council's nod.
Telecom
regulator TRAI and the DoT are deliberating a reduction in the license
and spectrum usage charge (SUC), which could offer another Rs 30-40
billion each for Bharti and VIL.
"Instead of a single mega relief package, measures could be announced in tranches, in our view," the note said.
In
a big blow to the telecom sector, the apex court on Thursday dismissed
the review petition filed by telecom companies to grant a relief on
their AGR liabilities, which have to be paid before the deadline of
January 24, 2020.
"We note that telcos owe Rs 920 billion in
AGR dues to the government, primarily Bharti (Rs 343 billion ) and VIL
(Rs 443 billion). The verdict may put a severe burden on telcos and have
unconceivable repercussions, particularly against the backdrop of VIL
facing a risk of shutdown (it may result in Rs 1 .2 trillion debt
default, large-scale job losses and subscriber churn)," Motilal Oswal
said.
"We thus believe that the final outcome may not be
linear and that there could be a payment extension or moratorium to say
the least. Irrespective of the outcome, Bharti is well prepared and,
along with RJio, appears poised for strong market share gains," it
added.
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