Vodafone Idea AGR Dues: What next for the struggling telecom operator?

Shares of Vodafone Idea Ltd. are now down 10% on Wednesday, December 31. This comes after the company's stock fell 16% from the highs of the day, ahead of the cabinet briefing at 3 PM.

Here's what has transpired so far:

The letter states that the AGR dues for the company have been frozen at ₹87,695 crore. There is a five-year moratorium, post which, payments will begin from financial year 2031, and will be staggered up to financial year 2042.

Vodafone Idea has to pay the AGR dues pertaining to financial year 2017-18 and financial year 2018-19 without any change over financial year 2026 to financial year 2031.

"I think welcome move. The government has made it clear that they would not want a duopoly in an important sector like telecom. There were also speculations and expectations of any waiver in interest. Overall debt is upwards of ₹2 lakh crore. The AGR dues are around ₹87,000 odd crore. So, if there is any waiver in terms of interest and penal charges etc., that could further give relief," Gurmeet Chadha of Complete Circle told CNBC-TV18.

The government has a 49% stake in Vodafone Idea and is its largest public shareholder. The official cabinet document states that these steps will enable orderly payment of dues to the government and also protect the interest of 20 crore customers of the company.

"It's very important news for the telecom sector, for the consumers at large, for the ecosystem as well. Because as rightly pointed out, you can't have just two players in the field. You need a third power player as well. So, it's a very good news. And I don't think there are any legal hurdles or legal issues involved. When the government has taken a stand and the Supreme Court itself had said earlier that the government is free to take whatever it does to save the company, there is no question of any legal hurdles now. I think it will simply go through. And Vodafone has got the best New Year’s gift it could possibly have had," Senior Supreme Court Advocate HP Ranina said.

The AGR dues, which have now been frozen, will be reassessed by the Department of Telecom, based on Deduction Verification Guidelines dated February 3, 2020. The outcome will be decided by a committee appointed by the Government and that will be binding on both parties.

"Excellent news for Vodafone Idea, as also for all its stakeholders. And it's a good development, which the government has announced in favour of the telecom industry in terms of Vodafone Idea. Now, I don't foresee any legal issues unless they bring about some they bring about some new surprise by getting some new charges, or they try to get in some other levy, but otherwise the breaking up of the total dues to be paid over a period of time will also get a breather as far as Vodafone Idea is concerned. From a legal perspective, I don't foresee any issues as such now," Sanjay Asher, Senior Partner of Crawford Bayley & Co. said.

Vodafone Idea shares are recovering from the lows of the day, currently trading 8.5% lower at ₹11.03.