InvestorQ : How should the government address the problem of telecom without hurting Vodafone and Bharti in the AGC case? Is there is a middle path?
Angel dcosta made post

How should the government address the problem of telecom without hurting Vodafone and Bharti in the AGC case? Is there is a middle path?

Answer
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Angel dcosta answered.
10 months ago


To begin with, the government and the Supreme Court are absolutely right in demanding that the telecom companies pay up the AGC charges with all dues outstanding. But pragmatism dictates otherwise. Bharti is hardly making profits and Vodafone is accumulating losses of nearly Rs.5,000 crore each quarter. There is no way these telcos can pay up the amount at this point of time. The only possible outcome would be that the telcos would default on their other debt obligations.

Now, the problem is that these debts are really huge! For example, Bharti has total debt to the tune of Rs.123,000 crore while Vodafone Idea has outstanding debt of Rs.149,000 crore. Bharti owes 53% of this debt to the government and Vodafone owes 79% of this debt to the government. Pushing them to default will only exacerbate the situation. The government really cannot afford such a situation and will have to look for a middle path. What could be the middle path?

One way to find a middle path is to give time and waive of part of it. That makes sense to the government and the industry. The telecom companies are not disputing these dues, although they have sought more time of up to 10 years. That can be shortened. Telcos want the government to waive the penalty and the interest cost, which should be fine, if they can assure on the full payment of the core dues. The priority must be to revive the telecom sector and pushing them to default does not add any value to anybody really. This will ensure healthy competition in telecom, now that MTNL is also going to be back.