As Vodafone Idea struggles with the hefty Rs 53,000 crore of AGR dues it must pay, fresh investment could be on its way. According to a Financial Times report citing people familiar with the matter, Google is considering buying a stake of about 5 per cent in Vodafone-Idea.
The report said that the process is at a very early stage.
If true, the move would put Google against Facebook in the growing battle for India’s telecom sector, after the latter invested Rs 43,574 crore for a 9.99 per cent stake in Reliance Jio, India’s largest telecom operator with over 370 million subscribers as of January. However, the report added that Google’s parent company Alphabet had also held talks about buying a stake in Reliance Jio.
In November 2019, Vodafone Group CEO Nick Read had warned that the India unit could be heading for liquidation if the government did not reconsider its plea against the AGR dues. However, in March, the Supreme Court reasserted that there was no question of going back on the decision to levy AGR dues.
While the government-calculated figure for the AGR dues is Rs 53,000 crore, Vodafone’s own estimates were at Rs 21,533 crore.
Under the formula mooted by the government, telecom companies impacted by the October 24 verdict of the Supreme Court could be allowed to pay the DoT-assessed dues in annual instalments in over 20 years (or less if they so opt), "duly protecting the next present value of the said dues using a discount rate of eight per cent (based on one-year marginal cost of lending rate of SBI which is currently 7.75 per cent)".
However, the Supreme Court slammed the proposal, having already ordered the dues to be paid within three months in October 2019. Vodafone-Idea paid around Rs 6,854 crore in March, which the company says was the full principle amount according to its self-assessment of AGR liabilitse from FY07 to FY19. However, the Department of Telecom's estimate for the same is Rs 53,000 crore.
Though initially warning that they may have to liquidate their India operations, the Vodafone Group in May said they had an exposure of Rs 8,400 crore to Vodafone India. An advance payment of $200 million (Rs 1,530 crore) was made to Vodafone Idea on April 22, in a bid to provide the company with liquidity to weather out the COVID-19 crisis.
In April, Vodafone-Idea asked the government for more time to pay the AGR dues for the January-March period due to the financial strain it had suffered amid the COVID-19 crisis.
In a bid to improve operational efficiency, Vodafone-Idea reportedly consolidated its 20 telecom circles into 10 ‘clusters’.