India's AGR dues issues unresolved as operators offer no guarantees

India's AGR dues issues unresolved as operators offer no guaranteets

Some sort of resolution to India’s ongoing legal wrangles about AGR still looks a long way off after two operators refused to offer bank guarantees requested recently by the Supreme Court.

In response to last week’s request that affected companies offer securities and guarantees they can pay against AGR dues, neither Vodafone Idea nor Bharti Airtel felt able to comply.

Vodafone Idea said it has no proposal to provide any bank guarantee as it has not made a profit for several quarters. Bharti Airtel refused to provide additional bank guarantees, pointing out that India’s Department of Telecommunications (DoT) already has a large sum of its money. Bharti Airtel is now hoping to be granted a 20-year payback period.

Indian news reports indicate that Bharti Group companies are willing to pay whatever amounts are required in accordance with the Supreme Court judgement – but not all at once. The reason Bharti cited for preferring to stagger payments over 20 years was the effect of a sudden outflow of funds on the amount of capex that operators like Airtel have to invest in their business annually.

It added, in its affidavit to the Court, that being given more time “will enable the Bharti companies to ensure that they also continue to make capital expenditures to support the vision of digital India and allow the customers to have a choice of competing players to deliver services”.

This argument probably applies even more to Vodafone Idea, which has already warned that it may go out of business if it is made to pay outstanding AGR dues of around six billion dollars in one shot. It has so far paid a little over $900 million. Airtel has paid more (about $2.36 billion) and is in a stronger position, but clearly also wants time to pay the remainder.

In the event, the Court has directed the affected companies to file audited balance sheets covering the past 10 years and come up with payment proposals, which it has asked the DoT to then consider.

The next hearing in the case is scheduled for the third week of July.

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