Brokerages are of the view that telecom operator Bharti Airtel is in a better position to pay the AGR (adjusted gross revenue) dues as it has recently raised cash while Vodafone Idea would continue to struggle and could even file for bankruptcy.

The Supreme Court on Friday slammed the telecom companies, as well as the Department of Telecom (DoT) for the telcos failing to submit the AGR dues and also directed for contempt proceedings to be launched against the network operators.

Post the SC order, which gives clear directions for strict actions against the telecom companies, Bharti Airtel paid Rs 10,000 crore on Monday to DoT as part of the AGR dues. The telecom company also said that it will make the remaining payment once self-assessment exercise completes before the next date of Supreme Court hearing on March 17.

Vodafone Idea has also said that it is planning to make the payment in the next few days.

Duopoly market?

Bank of America Merill Lynch (BofAML), in a report, said that while Bharti Airtel looks set to clear the dues, questions remained on if Vodafone could pay.

"As Vodafone Idea has $1.7 billion cash, it remains unclear how it could pay the entire amount. To date, the Vodafone Group and Birla group had maintained the view that they won't inject more cash. We await clarity on if Vodafone pays partly or sees potential injection from parent-companies or gets government relief," noted BofAML.

BofAML also explored the option that Vodafone may file for bankruptcy if it doesn't get government relief or there is no cash injection.

"In that scenario: 1) Under the IBC, a company continues to operate its services even after it is admitted by the NCLT as a stressed asset. Committee of creditors (COC), appoints a resolution professional (RP), who ensures the day-to-day functioning and starts looking for a buyer; 2) Telcos have to give at least 30 days advance notice to users before shutting down & the regulatory should be notified 60 calendar days in advance. Also, if NCLT resolution takes more time, users may leave VIL, impacting asset value," the BofAML report explained.

Axis Capital also maintained that Vodafone Idea’s debt burden is high, while Bharti Airtel is better placed to make payments. The brokerage added that Bharti may continue to gain market share at an accelerated pace.

Motilal Oswal also added that a duopoly market will likely benefit Bharti Airtel and hence raised the target price for the company to Rs 650 per share.

"The Supreme Court order leaves telcos with limited options to get relief from legal or government sources. It also sees far-reaching serious ramifications on the telecom and banking sectors," Motilal Oswal stated.

CLSA, on the other hand, maintained a 'sell' call on the stock and cut its target to Rs 3.5 per share from Rs 5.5 earlier.

As per the DoT calculation, Airtel has to pay Rs 35,500 crore, Vodafone Idea Rs 53,000 crore and Tata Teleservices a little over Rs 12,500 crore as AGR dues.

First Published:Feb 17, 2020 12:05 PM IST