Relatively Shorter Payment Timeframe for AGR Dues Can Have an Impact on Industry Structure: ICRA

Telcos received a major blow as they were seeking for at least 15 years of duration for clearing the AGR dues, but the Supreme Court decided to provide just ten years

By September 2nd, 2020 AT 1:01 AM

The Supreme Court today announced its judgement on the AGR case and allowed a ten-year payment term with 10% upfront payment for repayment of the AGR dues. For the unaware, the three telcos have t pay Rs 90,000 crore as AGR dues to the government. ICRA opined that the relatively shorter payment timeframe exerts additional pressure on the cash flows and necessitates sizeable ARPU increase and can have an impact on the industry structure. Telecom operators in the country are now looking to increase their ARPU by having another tariff hike in the coming months.

Indian Telecom Industry Was on a Path to Recovery

The telecom industry, after witnessing a tough phase with intense competition and pricing pressures, was on a path to recovery. In December 2019, all the three telcos- Reliance Jio, Airtel and Vodafone Idea announced tariff hikes. The tariff hikes have led to the restoration of pricing power to the telcos and aided improvement in the operating metrics of the industry with growth in revenues and profit margins. Thanks to the tariff hike, Airtel’s ARPU grew and it continues to grow with every passing quarter.

“The tariff hikes have led to the restoration of pricing power to the telcos and aided improvement in the operating metrics of the industry with growth in revenues and profit margins,” said ICRA in a note.

Over the last few years, the industry has been riddled with elevated debt levels amid consistently high capex requirements. As per ICRA estimates, the debt as on March 31, 2019 stood at Rs 5 lakh crore, which witnessed a decline to Rs 4.4 lakh crore as on March 31, 2020, following the series of deleveraging measures undertook by private operators during FY2020. Moreover, despite the improvement in cash flow and moderation in capex intensity, the debt is further expected to increase to Rs 4.6 lakh crore as on March 31, 2021 owing to addition of AGR dues.

ICRA’s Ms Anupama Arora believes that the 10-year payment for the AGR dues dampens the relief on auction payments to some extent and is likely to weigh heavily on the balance sheet of the weaker telecom operator, especially when the two-year moratorium gets over and auction payments start in FY2023.

Telcos received a major blow as they were seeking for at least 15 years of duration for clearing the AGR dues, but the Supreme Court decided to provide just ten years.

Chakri is a go-to guy for your next smartphone recommendation. Back in his engineering days, he used to play with smartphones by installing custom ROMs and that passion got him into the tech industry. He still goes nuts about a smartphone knocking his door for review. Currently managing everything at Telecom Talk, Chakri is trying to master PUBG Mobile in his free time.

Subscribe
Notify of
guest
2 Comments
newest
oldest most voted
Inline Feedbacks
View all comments

Recent Posts

Vodafone Idea 100 Mbps Broadband Plan Offers Only 350GB Data

Vodafone Idea (Vi) has a broadband arm called ‘You Broadband’. It is a broadband service that Vi provides to the...

Satellite Network Equipment Should Come From Trusted Sources: DoT

As per the new regulations mandated by the Department of Telecommunications (DoT), the companies providing satellite connectivity through gateway setup...

Verizon Teams Up with Crown Castle, SBA to Hasten Deployment of C-Band Equipment

Recently, Verizon acquired $45.45 billion worth of C-band spectrum. To hasten the deployment, the American multinational telecommunications has signed deals...