Telecom companies owing combined dues of Rs 1.43 lakh crore to government will now be able to pay it over a period of 10 years, as per a ruling by the Supreme Court. The ruling has offered a reprieve to telecom players including Vodafone Idea and Bharti Airtel who were weighed down by heavy debt and had been under intense regulatory and competitive pressure in recent years.
The breather is short of the 15-20 years sought by the telcos, and which the court said was unreasonable, but came as a shot in the arm to the companies that missed a January deadline to repay their dues. The stock market rallied in response although Vodafone Idea shares took a beating on the perception that its problems were not over. The Department of Telecommunications (DoT) had proposed a 20-year window.
A bench headed by Justice Arun Mishra asked the managing directors (MDs) or chief executive officers (CEOs)
of the companies to furnish undertakings or personal guarantees within four weeks for payment of dues. The court ruled “that, at the first instance, the respective Telecom Operators shall make the payment of 10% of the total dues as demanded by DoT by March 31, 2021.”
Telecom Service Providers have to make payment in yearly instalments commencing from April 1, 2021 up to 31, 2031 payable by 31st March of every succeeding financial year.” “In the event of any default in making payment of annual instalments, interest would become payable as per the agreement along with penalty and interest on penalty automatically without reference to Court. Besides, it would be punishable for contempt of Court.”
The court ordered service providers and DoT to furnish a compliance report every year by April 7 each year. The top court said the sale of spectrum by telcos facing insolvency proceedings shall be decided by the National Company Law Tribunal (NCLT). The decision will come as a relief to Vodafone Idea, which reported its eighth consecutive quarterly loss in the three months to June and expressed concerns about its ability to stay afloat. The company’s gross debt, excluding its lease liabilities, was Rs 1.19 lakh crore as of end-June.
Even so, the Supreme Court’s ruling that telecoms firms pay 10 percent of the dues owed by March 31, 2021 pushed Vodafone Idea’s stock down 12.76 percent to Rs 8.89 on the BSE. “The window for Vodafone to raise funds, have better models and give payback commitments is small, which is adding pressure on the stock,” said Abhimanyu Sofat, head of research, at stock brokerage IIFL Securities. (Source: Hindustan Times)