Given its inability to push through a significant tariff hike in a fiercely competitive telecom market, the cash-strapped telco may find it tough to survive beyond next April without a major relief package from the government, they said.
“Vi’s survival options appear to be rapidly disappearing after today’s adverse verdict in the AGR (adjusted gross revenues) case, which is likely to make its long overdue fundraise an even more daunting affair,” Mayuresh Joshi, head of equity research at Indian unit of US equity research firm William O’ Neil & Co, told ET.
Without funding, Vi may “find it a challenge to meet its immediate Rs 24,000 crore-plus payment obligation (by April next), and if all options collapse, the sector may well be headed for a duopoly” (of Reliance Jio and ), he said.
The top court on Friday dismissed pleas of Vi and Airtel seeking correction of what they called arithmetic errors in their AGR dues calculated by the telecom department.
“Vi may soon be bound for the bankruptcy court (read: National Company Law Tribunal) as its legal options for further recourse on the AGR dues front have run out, and potential global investors are likely to opt out of any serious funding commitment after today’s apex court judgement,” said an analyst at a top global brokerage.
At press time, Vi did not respond to ET’s queries.
The telco — with a debt of Rs 1.8 lakh-crore and a cash balance of just Rs 350 crore — has been trying to raise Rs 25,000 crore for the last 10 months, but it hasn’t been able to conclude any deals after talking to several marquee investors such as an Oak Hill-led consortium, and US private equity firms KKR and Apollo Global.
Vi had linked its viability to reduction of its AGR dues and fund raising, along with other factors. At its recent fiscal fourth quarter earnings call, the company had said it expected some relief from the top court which would cut its AGR dues to nearly half.
The country’s only loss-making private mobile phone service provider faces AGR dues of Rs 58,254 crore. The telco has paid only Rs 7,854 crore and needs to clear the rest in 10 annual instalments through March 31, 2031.
Citi Research said the dismissal of Vi’s AGR reassessment plea “is a material setback for the company” which would make “capital raise incrementally more challenging”.
Consequently, Citi does not expect any pick-up in Vi’s network-related spends as the telco has over Rs 24,000 crore of payments coming up by next April towards existing debt repayments (Rs 8,000 crore), spectrum payment instalment (Rs 8,200 crore), and annual AGR payment (Rs 8,000 crore).
Analysts said Vi, more than ever before, is now dependent on relief from the government on payment timelines, as in extension of the moratorium on spectrum payment and/or any legislative action to extend AGR payment timelines, though the latter appears unlikely.
Vi has already requested the Department of Telecommunications (DoT) to give till April 2023 to pay its Rs 8,292 crore dues related to spectrum purchased in auctions.
The company owes DoT more than Rs 1.5 lakh crore by way of AGR and deferred spectrum payment dues, and the government would be the biggest loser if the struggling telco goes bankrupt, experts said.
