Telecom dues: Curative petitions rarely admitted, say analysts

With only one week left for them to pay over Rs 88,600 crore in previous dues, Bharti Airtel and Vodafone Idea are left with final authorized treatment of submitting a healing petition however such petitions are hardly ever admitted by the Supreme Court, analysts mentioned on Friday.

The Supreme Court on Thursday dismissed overview petitions filed by telecom firms in opposition to its October 24, 2019 order that requested for inclusion of non-telecom revenues for calculating statutory dues reminiscent of license payment and spectrum utilization cost.

Dues, which whole to Rs 1.47 lakh crore for 15 telecom firms together with Airtel and Vodafone Idea Ltd (VIL), as per the October order, need to be paid by January 23.

This January 23 deadline for fee might not apply to non-telecom firms which too have been requested to pay substantial quantities in previous dues, Kotak Institutional Equities mentioned in a observe.

“From a legal standpoint, the only option available to the telcos now is a curative petition,” it mentioned.

The guidelines round healing petition are pretty tight because the petitioner has to ascertain that there was a real violation of ideas of pure justice, it mentioned including the court docket can impose ‘exemplary’ prices to the petitioner if the plea lacks advantage. “We note that curative petitions are rarely admitted.”

ICICI Securities mentioned Bharti Airtel has already raised capital of USD three billion, which ought to assist it meet the burden. “But the same remains a herculean challenge for VIL – a challenge that cannot be resolved without government intervention, in our view.”

Though Bharti Airtel and VIL can nonetheless file a healing petition, “the probability of resolution remains bleak,” it mentioned.

UBS Group mentioned the ruling raises dangers for lenders to the businesses. “IndusInd, Yes Bank and SBI seems to have comparatively excessive publicity to Vodafone Idea,” it mentioned.

“We do not have a view on whether the government will intervene and offer some relief in the form of a waiver and/or staggered payment terms,” Kotak mentioned.

ICICI Securities mentioned VIL promoters – UK’s Vodafone Plc and Aditya Birla Group, have already talked about that if your complete adjusted gross income (AGR) legal responsibility needs to be paid, they must shut store.

“We don’t see the situation for Vodafone Idea being salvaged without government intervention. Apart from other stakeholders in VIL, the government too could be one of the most impacted parties if the company shuts down as it is owed Rs 90,000 in deferred spectrum dues, besides the AGR liability. We also see an indirect impact on PSU banks if VIL fails to cough up the money.”

Kotak mentioned Vodafone Idea administration and promoters have been fairly vocal about not eager to throw good cash after unhealthy in case there is no such thing as a aid is granted by the Supreme Court. “We believe it makes sense.”

“From a government perspective, it needs to consider the serious ramifications of further consolidation in the sector including loss of revenues for itself, banking sector NPAs and temporary-but-severe inconvenience to consumers,” it mentioned.

Morgan Stanley mentioned the AGR ruling for the telco trade would profit Reliance Industries from each increased subscriber development and tariff will increase.

“This could raise earnings up to 8 per cent for FY21, with a similar NAV impact. This partly also negates some recent challenges in the chemicals business, where margins touched below industry cash costs in December 2019,” Morgan Stanley mentioned.

Increased chance of additional consolidation within the sector is a constructive for Reliance Jio and Bharti, the quick hit of huge payouts for the latter however. “Upside from further consolidation will more than makeup for the payout impact for Bharti,” Kotak mentioned.

Following the October 24, Supreme Court order, the Department of Telecom (DoT) estimated that the whole legal responsibility of 15 telecom firms, together with penalties and curiosity, can be Rs 1.47 lakh crore.

It has estimated one other Rs 2.four lakh crore in legal responsibility for non-telecom firms reminiscent of state-owned gasoline utility GAIL India Ltd and energy transmission agency PowerGrid, which had taken licenses to commerce broadband on optic fiber operating alongside their pipelines and transmission strains.

Sources, nevertheless, mentioned no demand discover was served both on GAIL or PowerGrid and solely evaluation orders had been issued which the 2 firms contested placing throughout information on revenues earned from such licenses.

The evaluation put GAIL legal responsibility at Rs 1.72 lakh crore and that of PowerGrid at Rs 21,000 crore. Another Rs 40,000 crore legal responsibility was assessed of Oil India Ltd.

However, a requirement discover was served within the case of GNFC for Rs 15,097 crore.

The statutory liabilities within the case of Bharti Airtel provides as much as almost Rs 35,586 crore, of which Rs 21,682 crore is license payment and one other Rs 13,904.01 crore is spectrum dues (excluding the dues of Telenor and Tata Teleservices).

VIL stares at unpaid statutory dues of Rs 53,038 crore, together with Rs 24,729 crore of spectrum dues and Rs 28,309 crore within the licence payment.

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