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Vodafone Idea Closer To Default; DoT Telcos Litigation To Rise

Vodafone Idea moved one step closer to default with the company able to pay, on Monday, just Rs 2,500 crore of its total AGR liability of Rs 53,039 crore. The telco’s lawyer told the Supreme Court his client would deposit another Rs 1,000 crore by Friday; the Supreme Court rejected senior counsel Mukul Rohatgi’s appeal to stop the Department of Telecommunications (DoT) from encashing Vodafone Idea’s bank guarantee.

The DoT has around Rs 7,000 crore of bank guarantees of various telcos like Vodafone Idea, Bharti Airtel, Tata Teleservices and Telenor and DoT officials said they would take a final call on Tuesday and this may include encashing bank guarantees in case the telcos didn’t pay their dues.

While Bharti Airtel paid Rs 10,000 crore towards its Rs 35,586 crore of AGR dues on Monday – it will pay the rest before the next SC hearing – Tata Teleservices paid Rs 2,197 crore of its Rs 13,823 crore dues; the company submitted details of its calculations to support the payments it has made.

On Saturday, Vodafone Idea’s communication to the stock exchanges had hinted at the likelihood of defaulting and shutting down when it said, “the Company is currently assessing the amount that it will be able to pay to DoT” and “the Company’s ability to continue as a going concern is essentially dependent on a positive outcome of the application (to the SC)”.

The stage is also set for increased litigation between the DoT and the telcos on the issue of AGR. The telcos started calculating their exact dues soon after the original SC judgment and believe DoT has done quite a bit of double-counting. While it has included the inter-connect usage charges (IUC) received by telcos as part of their revenues, it has not deducted the IUC payments they have made to other telcos. While telcos believe this could reduce their dues by around 15-20% at the very least, DoT officials privately said the amounts could even rise and, as compared to the Rs 1.47 lakh crore estimate so far, the final tally could go up to even more than Rs 1.7 lakh crore.

Telcos hope to complete the exercise before March 17, the next date of the SC’s hearing; the DoT will naturally challenge these. While the telcos will have to pay GST on the dues, this will not add to their outgo as all of them have large unutilised GST credits, so this will just be adjusted against that.

Another possible dispute could arise out of the Tdsat’s review of the dues of PSUs. While PSUs have been given notices of over Rs 300,000 crore, they are going to approach Tdsat against the notices. If the Tdsat gives them relief since they have, primarily, long distance and IP-II licences, telcos could also ask for relief as some part of their AGR dues are also on account of the long distance and internet services they offer.―Financial Express

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