Vodafone Idea accepts four-year payment moratorium on AGR contributions
Telecoms operator Vodafone Idea said on Wednesday that its board of directors had approved the exercise of the option to postpone the company’s spectrum auctions for a period of four years.
“We would like to inform you that the Board of Directors of the Company has approved the exercise of the option to postpone the Company’s spectrum auction tranches for a period of 4 years (October 2021 to September 2025)”, the company said in a statement. exchange deposit.
The other options proposed in the said notification by the DoT will be considered by the company’s board of directors within the allotted time, Vodafone Idea said on Wednesday.
After the announcement, shares of the telecommunications company were trading 5.6% higher on BSE at Rs 10.56 each.
In line with the bold reforms announced for the telecommunications sector, the government recently wrote to telecommunications operators, including Bharti Airtel, Vodafone Idea and Reliance Jio, asking them to let them know by October 29 whether they would opt for a moratorium of four years on contributions, according to sources.
It also gave operators 90 days to indicate whether they wished to opt for the conversion into equity of the amount of interest relating to the moratorium period.
Along with this option, audited financial statements for the previous fiscal year (2020-2021) may be submitted, according to a letter seen by PTI.
The government has offered the option to defer payment of spectrum auction installments due for up to four years, with immediate effect, excluding installments due for 2021 spectrum auctions.
This option is applicable from fiscal year 2022-23 to fiscal year 2025-26, indicates the letter.
These deferred amounts will be distributed equally over the remaining installments to be paid, without increasing the existing period provided for making the installments.
Interest as stipulated in the relevant year of the spectrum auction will, however, be charged so that the net present value (NPV) of the amount payable is protected.
“The option of a moratorium could be sent to this office by October 29,” the letter said.
The letters were sent by the Ministry of Telecoms on Friday to the various operators.
“The option to convert the amount of interest, arising from the NPV deferred spectrum royalty protection, relating to the moratorium period, on an equitable basis, will be exercised within 90 days of such notification”, did he declare.
The DoT letter sets out the fine print related to the option of a moratorium on deferred spectrum auction payments and AGR-related contributions, as well as how to convert the amount of interest into equity.
The method of obtaining the price and the valuation of the conversion into shares of the debit interest is different for listed and unlisted companies.
One of the letters sent to a listed company mentions that equity shares would be issued by the company to the government on a preferential basis.
The NPV of the interest amount will be calculated on the date of exercise of the option. The interest amount will continue to be treated as a loan to the business until the completion of the equity injection process, he said.
Recently, the government approved a highly successful aid plan for the telecommunications sector which includes a four-year suspension for companies from the payment of statutory contributions, the authorization to share rare airwaves, a change in the definition of income on which the levies are paid and 100% foreign investment. by the automatic route.
The measures, aimed at relieving companies such as Vodafone Idea that have to pay thousands of crore in unfunded past statutory contributions, also include the removal of spectrum usage charges (SUC) for airwaves acquired in future spectrum auctions. .
For past contributions, the government has allowed a moratorium or deferral of up to four years in annual payments. But telecommunications companies will have to pay interest during the moratorium period.
In addition, the government will have the option of converting the amount due relating to the deferred payment into equity at the end of the moratorium / deferment period.
It also gave the possibility to telecom operators to pay the amount of interest resulting from said suspension of payment as equity.
Last month, Bharti Airtel chairman Sunil Mittal said the company would opt for the payment moratorium proposed in the telecom assistance program and redirect cash flow towards aggressive network building.