Even as Vodafone Idea is struggling with over Rs 2 lakh crore debt, the government this week approved the conversion of its over Rs 16,133 crore interest dues into equity. With this conversion, the government has become the single-largest stakeholder in the loss-making telecom firm with a 33.14 per cent stake.
Vodafone Idea will issue equity shares to the government at face value of Rs 10 each. “Ministry of Communications…passed an order today ie 3 February, 2023… directing the company to convert the NPV of the interest related to deferment of spectrum auction instalments and AGR dues into equity shares to be issued to the government of India,” the filing said.
The relief for the company comes as part of the reforms package announced by the government in September 2021.
“The total amount to be converted into equity shares is Rs 16133,18,48,990. The company has been directed to issue 1613,31,84,899 equity shares of the face value of Rs 10 each at an issue price of Rs 10 each,” the filing added.
The Timeline of the Case:
2005: Telecom operators like Airtel and Vodafone (then known as Hutch) refuse to pay adjusted gross revenue (AGR) dues over a dispute about its definition. The Cellular Operators Association of India moves the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) challenging the definition of AGR, which included all revenues (prior discounts) from both telecom and non-telecom services. The telecom companies had a problem with non-telecom services being counted in AGR calculation.
2015: Ruling on the case after 10 years, the TDSAT agrees with the telecom companies and said non-telecom revenues, such as rent, dividend and proceeds from sale of assets, should not be part of AGR.
October 2019: Supreme Court delivers its verdict on the AGR issue for calculating government dues of telecom companies such as licence fee and spectrum usage charges. It upholds the DoT’s definition of AGR, which included revenue from both telecom and non-telecom services of companies.
November 2019: Telecom companies seeks review of the SC order.
January 2020: Telecom companies miss the deadline to pay AGR dues. Of the total AGR dues worth over Rs 92,000 crore, Airtel has to pay more than Rs 21,000 crore, while Vodafone Idea’s dues stood at about Rs 28,000 crore.
July 2020: The Supreme Court confirms DoT’s demand of 1.56 lakh crore and said there can be no adjustment of dues and that the AGR calculation is final.
September 2020: SC allows the telecom companies to pay the AGR dues in instalments over a 10-year period; they were told to begin by making an upfront payment of 10 per cent of the total dues. The payment timeline started from April 1, 2021.
January 2021: Airtel approaches SC for change in AGR dues.
July 19, 2021: Joining Airtel, Vodafone also approaches SC for modificaton in AGR dues. Supreme Court maintaines its stand on the government’s adjusted gross revenue (AGR) demand from telecom firms and observes that it had multiple times said the dues can’t be recomputed. It reserves the order on the matter.
July 23, 2021: SC dismisses telecom companies’ applications on modification in the AGR definition.
January 2022: Pursuant to the telecom reforms package announced by the government, VIL Board at its meeting held on January 10, 2022, approves the option to convert the full amount of interest related to deferred spectrum auction instalments and AGR dues to the extent of about Rs 16,133 crore into equity.
What Is AGR?
Telecom companies need to pay licence fees and spectrum usage charges (SUC) in the form of ‘revenue share’ to the central government. Adjusted gross revenue, or AGR, is the amount on the basis of which the government’s licence fees and SUC are calculated.
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