Will the Indian government be allowed by its own Supreme Court to offer a last-minute reprieve to operators due to pay the equivalent of billions in dollars in outstanding fees by this Thursday?
It seems that Bharti Airtel, Vodafone Idea and Tata Teleservices, hit with a ruling to pay adjusted gross revenue (AGR)-based dues by 23 January, certainly hope so. The hardest hit are Vodafone Idea, which must pay around $4 billion and Bharti Airtel, which has to deal with a $3 billion penalty.
According to Indian press reports, all three plan to ask the Supreme Court to allow them to negotiate with government a suitable timeframe to make the payments. The success or otherwise of this attempt to gain more time could become clear as early as Tuesday when the petition, filed on Monday, should receive an urgent hearing.
The fees are based on a 24 October Supreme Court verdict extending the definition of adjusted gross revenue (AGR) on which licence fees and spectrum usage charges (SUC) are to be paid.
This follows recent news that Vodafone Idea is already setting aside some of its finances – nearly $400 million – to deal with the fees. Last week, it reportedly set aside part of the proceeds of an INR250 billion (about $3.5 billion) rights issue for the amount it is required to pay the Department of Telecommunications (DoT) in licence fees and spectrum usage charges by 23 January.
In a statement, Vodafone Idea said that a recent moratorium on spectrum payment had led to the change in allotment of issue proceeds. This delay, it seems, has enabled the company to direct at least some of the moneys earmarked for deferred payment liabilities towards spectrum payments to support payment of the adjusted Supreme Court fees demand.
How the government will respond is unclear. While the government has insisted it can only act as directed by the Supreme Court, the distinct possibility that a three-player private sector market could be reduced to two players may give it pause. Certainly the stock market seems to think so.
Shares of Vodafone Idea jumped 13 per cent on Monday; the market seems to think that some sort of government intervention that will allow the company more time to repay its dues is now likely.
Is the market right? Certainly, a Vodafone Idea exit would not do much to encourage investment in India; the collapse of a major employer could be bad news too. So government might look favourably on a new payment timetable. However, it is not clear whether an extension alone would be enough if the sum owed cannot be reduced.