Vodafone opts for 4 Year Moratorium on AGR Charges

Vodafone opts for 4 Year Moratorium on AGR Charges

Indian Market
by 5paisa Research Team Last Updated: 2022-08-08T18:53:53+05:30

Almost a month after the government offered the telecom relief package, Vodafone idea has opted for the 4-year moratorium which pertains to payment of AGR charges and spectrum usage charges. Bharti is yet to respond to the 4-year moratorium offer. The last date for giving a declaration of intent to avail the moratorium happens to be 29th October.

AGR stand for the Annual Gross Revenues and has been the bone of contention regarding the inclusion of non-telecom revenues. That has been settled by the court and the telecom companies have to pay the AGR dues to the government and the moratorium only allows for postponement of the dues considering the cash flow constraints.

However, even Vodafone plans to avail the facility in tranches. To begin with, the board of Vodafone Idea has only approved the moratorium for the Spectrum Usage Charges and not for the AGR charges. The SUC will now be deferred during the four year period from October 2021 to September 2025.

The Telecom Relief package offered by the government on 15-September included this four year moratorium clause as well as the facility to convert the principal statutory dues to the government into equity; subject to conditions. However, this can be done at the end of 4 years once the moratorium is completed. It will address the cash flows issue but not the profitability issue for the telecom companies.

Vodafone has total debt of Rs.191,000 crore in its books and there were worries that the implosion of Vodafone would have serious repercussions in terms of jobs, dues to banks, dues to the government and dues to other operating creditors. The telecom companies basically have 4 years to bring their operations back on track.

The catch in the entire moratorium story is that the company availing the moratorium facility will have to pay interest on the outstanding amount. This interest will be charged at 2% above the MCLR (marginal cost of funds based lending rate). That would be a substantial cost and add to the eventual liability by a big chunk. 

That explains why telecom companies have been generally wary of jumping at the moratorium offer. Bharti Airtel has already hinted that it may not be too keen to avail the moratorium considering its huge costs.

Start Investing in 5 mins*

Get Benefits worth 2100* | Rs. 20 Flat Per Order | 0% Brokerage

About the Author

Our research team is composed of some highly qualified research professionals, their expertise range across sectors.

Open Free Demat Account

& get benefits worth 2100*

 
Resend OTP
Please Enter OTP
  • Have Promo code?
  • Use code ACT2100
Enter Promo code

By proceeding, you agree to the T&C.

Start Investing Now!

Open Free Demat Account in 5 mins

Enter Valid Mobile Number