Vodafone Idea Will Face Multiple Challenges in Clearing AGR Dues: Credit Suisse

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Telecom Operator Vodafone Idea is facing massive financial burden because of AGR dues. Currently, Vodafone Idea has just paid 13% of the total outstanding AGR dues. As per the latest report by Credit Suisse, Vodafone Idea will face difficulties in clearing more than Rs 50 billion incremental upfront dues in the AGR dues. The report further states that once Vodafone Idea clears Rs 69 billion of AGR dues, it is estimated that the telco giant will have Rs 60 billion of cash balance as of March 2020. The assumption is also made that Vodafone Idea will have no incremental Capex in the fourth quarter of 2020.

Vodafone Idea Will Face Difficulty in Maintaining Positive Cash Flow

Vodafone Idea will face various challenges in maintaining cash flow post FY22. As per the report, the telco giant will have to manage its cash flow on deferred spectrum debt. Also, APRU of the telco, which is Rs 200 on a subscriber base of Rs 280 million, would generate Rs 250 billion. However, Vodafone Idea will have to pay Rs 157 billion towards spectrum payment and AGR dues which might range from Rs 47 billion to Rs 116 billion depending upon the tenure of the payment. Telecom operators have already put forward the request of the deferred payment mechanism for massive AGR dues spread over 20 years.

Bharti Airtel and Vodafone Idea Suggests Spectrum and Licenses as Security for Deferred Payment

All the telecom operators are facing trouble because of the AGR dues. Earlier the supreme court directed all the telcos to submit an affidavit regarding the payment of AGR dues. Vodafone Idea counsel stated that the telco could not secure bank guarantees, and it does not have money to pay employees salary and meet operating expenses.

However, both Bharti Airtel and Vodafone Idea have suggested spectrum, licenses, and earlier bank guarantees to be considered as securities for deferred payment mechanism of massive AGR dues. Currently, Bharti Airtel is in a better position to clear AGR dues. The telco giant has already cleared 48% of AGR dues as per DoT estimates whereas Vodafone Idea has just cleared 13% of the AGR dues as estimated by DoT.

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