Shares of telecom operators Vodafone Idea (VIL) and Bharti Airtel came under selling pressure, falling by up to 15 per cent on the BSE in intra-day trade on Friday, after the Supreme Court (SC) dismissed the application of telecom companies that sought recomputation Adjusted Gross Revenue (AGR) dues demanded by the Department of Telecommunication (DoT).
Post the developmeny, VIL slipped 15 per cent at Rs 7.87 on the BSE in intra-day trade with the stock trading close to its 52-week low of Rs 7.60, last hit on October 19, 2020. A combined 809 million equity shares changed hands on the counter on the NSE and BSE in intraday deals.
Bharti Airtel, on the other hand, traded 1 per cent lower at Rs 539.55, after hitting an intra-day low of Rs 532.85 on the BSE. In comparison, the S&P BSE Sensex was down 0.11 per cent at 52,787 points.
The Supreme Court (SC) on Monday had maintained its stand on the government’s AGR demand from telecom firms, observing that it had multiple times said the dues can’t be recomputed. It, however, reserved the order.
Three telecom firms — Bharti Airtel, Vodafone Idea and Tata Teleservices — had moved the apex court seeking correction in calculation errors in the DoT’s AGR demand.
On September 1, 2020, the SC allowed the firms to pay the AGR dues in instalments over a ten-year period. They were told to begin by making an upfront payment of 10 per cent of the total dues. The payment timeline started from April 1, 2021.
“VIL remains the weakest private telco. AGR dues payment extension was only a short-term breather and its survival hinges on quick capital infusion and tariff hike/floor tariff implementation. The need for capitalisation is urgent mainly due to its upcoming payment commitments, lagging spends on network and continued relative market share loss,” ICICI Securities had said in March quarter result update.
The company indicated that it is in active discussions with potential investors and expects the fund raise soon, with industry stress delaying the process. Similarly, on the tariff correction front, without indicating exact timeline, it has indicated that tariff hike and/or floor tariff implementation will be key. We note that while the company intends to raise tariffs, it would be a function of all players’ agreement (including Jio), the brokerage firm had said.