The telecom operators have filed their affidavits regarding payment possibilities in the AGR dues case with the Supreme Court, according to people in the know. The next hearing on the matter is scheduled for tomorrow and the market will be keenly watching the repayment timeline decision.
In the last hearing, the apex court asked telecom operators to give a roadmap for payment, timeline and security if a staggered payment schedule had to be considered.
Most brokerages expect Bharti Airtel to be in a strong position to furnish guarantees and maintain cash outflow for payments if a 20-year timeline isn’t agreed to.
SBI Caps Securities does not expect the Supreme Court to agree to a 20-year time frame.
“SC is unlikely to allow 20 years and is most likely to consider a shorter timeframe. It is likely to be anything between 10-15 years. The shorter time frame may not be good news for Vodafone Idea. If Vodafone Idea is asked to pay dues upfront it will have no option but to shut down;” it says in a report.
The report adds that telecom operators may find it tough to furnish personal guarantees to make the payment.
“Both, Bharti Airtel and Vodafone Idea will need to raise debt to repay dues. We believe that Bharti Airtel is relatively better placed & possibly could furnish bank guarantees/other possible solutions. Outstanding dues for Vodafone Idea on account of the spectrum at higher than that of AGR dues. For spectrum, it has dues worth $ 11.7 billion versus $6.8bn for AGR. Bharti spectrum dues are at $5.4 billion higher than AGR dues of $3.4 billion.”
Motilal Oswal believes that even if a 20-year tenure is agreed to it would lead to a cash outflow of Rs 2,700 core for Bharti Airtel and Rs 5,200 crore for Vodafone Idea annually. To furnish this, Vodafone Idea will need a 50 percent ARPU hike.
“Maintain our bullish stance on Bharti, with target price of Rs 710.; maintain Jio at Rs 885/share post its debt reduction plans and ongoing series of funding from global investors,” it said.
Edelweiss securities also had a similar view. “Nature of security acceptable against dues could become a contentious issue. We do not expect promoters of these companies to hand out personal guarantees. They would prefer terms such as license cancellation, no dividend/ buyback till repayment,”
Fitch Ratings also belives that Bharti Airtel is in a strong position versus Vodafone Idea.
“Bharti Airtel has raised $7-8 billion of equity through a rights issue, IPO & stake sale in Airtel Africa. Add to that tariff hikes announced in Dec 2019 have provided a big support to cash flow generation for Bharti,” it said.