Bharti Airtel, who received a similar offer to defer his contingent of around Rs 3,000 crore for the period, “is studying the possibility and will respond within the deadline (June 30),” said a person familiar with the matter. This offer does not apply to Reliance Jio Infocomm, which does not have an outstanding contingent for the period, another person said. Airtel and Jio did not comment.
The government had already allowed telecommunications companies to defer AGR charges up to FY17 by four years. Vodafone Idea and Airtel have said they will defer these fees, but only the former have agreed to convert the accrued interest into equity, which will mean the government holds a 33% stake. Telecommunications companies pay license fees and fees for frequency usage to the government on the basis of AGR.
In similar letters of June 15, DoT had asked all three private telecommunications companies to make a decision to defer AGR payments within 15 days. “The said DoT letter also provides the company with an option to pre-convert interest charges on these AGR-related fees, for which a period of 90 days has been granted from the date of the said DoT letter,” Vodafone Idea said in a statement to the stock exchanges late Wednesday night.
At its meeting on June 22, the board of directors of the loss-making company approved “the exercise of the possibility of deferring AGR-related taxes for a period of four years with immediate effect,” Vodafone Idea said in its announcement. The telecommunications company has not yet responded to a call to convert the accrued interest into government equity. The new deferral option could mean the government could hold an additional 5-7% equity, apart from the current expected 33%, in the telecommunications company if Vodafone Idea chooses the conversion option, according to analysts.
‘Government may end up holding up to 40%’
“The final incremental stake will depend on the interest rate and the price at which it is converted into equity, but as a ballpark, the government stands to hold up to 40% of the shares in VIL,” said one of them.
Even with 33%, the government would be the largest single shareholder in the company. The promoters Vodafone Plc and Aditya Birla Group would together have an ownership share of 50%.
The operator did not respond to inquiries about the possible extent of government possession.
Vodafone Idea had previously stated that since the average price of the company’s shares on the relevant date on 14 August 2021 was below face value, the share shares against the interest rate on AGR quotas up to FY17 will be issued to the government at face value of Rs 10 per share. . share, subject to final confirmation of DoT.
Vodafone Idea shares closed Thursday at Rs8.55, up 0.2%, on BSE.
The loss-making telecommunications company’s AGR charges up to FY17 amounted to Rs 58,254, of which it paid Rs 7,854. Airtel, the second largest telecommunications company, had AGR contingents worth Rs 43,000 crs from FY17; it has paid Rs18,004 crore of this.
“When the relief package was announced, it considered the tax up to FY17 based on the Supreme Court ruling. The understanding was that the telecommunications companies would have the choice to defer incremental charges even then. This letter from DoT is a result of the same,” said another industry chief.
While the continued postponement will help the telecommunications company with cash flows, to be competitive in the market and turn operations around, Vodafone Idea needs to immediately complete its fundraising of Rs 10,000 crore from external investors, experts said. The 4,500 crore Rs raised from its promoters through fresh equity earlier this year is not enough, analysts said. On 22 June, the telecommunications company’s board of directors approved an additional Rs 436 crore from the British promoter Vodafone Group.