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Part relief for telcos from 2-year moratorium but more needed: Analysts


New Delhi:  The government's decision to grant two-year moratorium on spectrum payments to telecom companies will provide near-term cash flow relief, especially to Vodafone Idea, but the move by itself may not be enough to address leverage concerns of the troubled telcos, leading analysts said.

"We await clarity on whether this is the extent of relief that the government is willing to offer or whether there could be more measures forthcoming," Citi said in its latest report.

It said that while the deferment of spectrum auction payments for two years, that is 2020-21 and 2021-22, will offer some much-needed cash flow relief, particularly to Vodafone Idea, that "by itself may not be sufficient to address leverage concerns of the companies".

Credit Suisse in its report on Thursday said that while deferment of spectrum auction payment is in line with its expectations, "no decision on license fees reduction is clearly negative".

"On AGR, we believe the telcos are likely to approach Supreme Court for relief," it said.

Goldman Sachs Equity Research estimated that with the two-year moratorium on such payments (in FY21 and FY22), Bharti Airtel and Vodafone Idea can potentially save USD 2 billion (about Rs 14,200 crore) and USD 3.3 billion (about Rs 23,400 crore), respectively, over this period, amounting to 41 per cent and 52 per cent of their respective AGR-related liability.

"While this moratorium helps near-term liquidity for telcos, especially VIL (Vodafone Idea Ltd), we do not see this improving balance sheet leverage of the company, which stood at 20x (net-debt-to-EBITDA) as of Sept 2019. For Bharti, this moratorium will help better meet any potential AGR related liability, in our view," the report said.

The government on Wednesday doled out a Rs 42,000 crore relief to debt-laden telecom companies after it agreed not to take any payments for spectrum they use for the next two years.

The Union Cabinet headed by Prime Minister Narendra Modi approved giving Bharti Airtel, Vodafone Idea Ltd and Reliance Jio an option to avail a two-year moratorium on payments they were supposed to make in yearly installments for the spectrum bought in auctions.

While the move will give Rs 42,000 crore relief to Bharti Airtel, Vodafone Idea and Reliance Jio, the government is unlikely to intervene in the Supreme Court mandated statutory payments, top sources have said.

Bharti Airtel, Vodafone Idea and other telecom operators have to pay Rs 1.4 lakh crore in outstanding statutory dues following a Supreme Court order on October 24 that sent shock waves through an industry already grappling with billions of dollars in debt and an intense tariff war to retain customers.

The top court last month upheld the government's position on including revenue from non-telecommunication businesses in calculating the annual adjusted gross revenue (AGR) of telecom companies, a share of which is paid as licence and spectrum fees to the exchequer.

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