Vodafone Idea agrees to take a four-year moratorium from AGR payments

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Vodafone Idea has agreed to take advantage of the government’s four-year spectrum payment moratorium, which is part of the telecom sector’s assistance package. The telecom has now agreed to both a spectrum and an AGR moratorium, which would save the cash-strapped company roughly Rs one lakh crore in total.

AGR is a mechanism of fee-sharing between the government and telcos, which switched from a ‘fixed licensing fee’ model to a revenue-sharing fee’ one in 1999. Telcos are supposed to split a percentage of AGR with the government in this process.

In line with the Department of Telecommunications (DoT) statement of 14 October 2021, the company’s Board of Directors has approved the exercise of the option of deferring the company’s spectrum auction installments for a period of four years.

Vi’s decision follows the government’s announcement of a relief package in the middle of September. Among the terms were a four-year moratorium on AGR and spectrum payments, decreased BGs, and the ability to convert statutory dues to equity.

It allowed the operators 90 days to declare if they want to convert the interest earned during the moratorium period into equity. According to the letter given to the telcos, this alternative would require the submission of audited financial accounts for the previous financial year (2020-21).

The option to convert interest accrued on AGR and spectrum delayed payments into government equity has yet to be confirmed by Vi. The Company’s Board of Directors will evaluate the other option presented in the DoT notification within the timeframe specified.

Rival Airtel has also agreed to both types of moratorium, but Reliance Jio is yet to notify the Department of Telecommunication of its decision. 

On Friday, Vi’s shares were trading at Rs 9.58, down 1.24 percent on the BSE. The package has significantly shifted the game, potentially alleviating Vi’s immediate cash flow load. The telco will save over Rs 25,000 crore in annual cash flow if it opts for a moratorium on both AGR and spectrum dues.

Aside from changing interest on statutory dues into equity immediately, the Centre also has the option of converting operators’ principal statutory dues due to postponed payment into equity after the moratorium period – or after four years.

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