Vi Likely to Receive 4-5 Year Moratorium on AGR Dues; Potential Halving of Dues

Vodafone Idea (Vi), the financially strained telecom operator, is expected to receive a significant reprieve from the government in the form of a four to five-year moratorium on its adjusted gross revenue (AGR) related statutory dues, which total over ₹83,000 crore. This moratorium would be interest-free, offering immediate financial relief to the company.

Sources familiar with the matter indicate that after this moratorium period, Vi will be required to pay the arrears in six installments. That said, the reality is a bit more complicated. the total amount owed is likely to be substantially reduced, potentially by half, following a reassessment of the company's liabilities.

A committee, led by a current or former secretary-level official, will be established to review the matter. This committee will consider the perspectives of both the Department of Telecommunications and Vodafone Idea before determining the final payable amount, according to sources who wished to remain anonymous because the details are not yet public.

The government's decision is pending cabinet approval and is expected to be announced in the coming weeks.

Vi faces a payment of over ₹18,000 crore in March as the first installment following the end of the previous moratorium on AGR payments granted to telecom companies in 2021. This earlier moratorium was not interest-free, which led to an increase in the outstanding arrears each year.

Industry experts estimate that Vi and Bharti Airtel currently pay a compound interest of 29-30% annually on these outstanding amounts. These payments are the result of a 2019 Supreme Court ruling that upheld the Department of Telecommunications' position. The ruling stated that telecom companies must base their statutory payments, including spectrum and license fees, on their adjusted gross revenue, which includes income from both telecom and non-telecom sources.

Under the anticipated relief package, the total amount Vi owes will be fixed, preventing any further accrual of interest. It is expected that Bharti Airtel will continue to adhere to its existing payment schedule, as this relief is specifically targeted toward Vodafone Idea.

Vodafone Idea has expressed its inability to meet the AGR dues, prompting the government, which holds a 48.99% stake in the company after converting some of Vi's past dues into equity, to offer assistance. The Supreme Court recently authorized the government to develop a special package addressing Vi's overall AGR liabilities.

Successfully resolving this issue could enable Vi to secure fresh capital, including the ₹25,000 crore it plans to raise. An equity issue would dilute the government's stake, potentially allowing the Centre to convert additional dues into equity, providing further financial flexibility for the company.

Currently, the Aditya Birla Group and Vodafone Group Plc hold 9.50% and 16.07% stakes in Vodafone Idea, respectively.

Previous reports indicated that Tillman Global Holdings, a private equity firm based in New York, was in negotiations to invest $4-6 billion (₹35,000-52,800 crore) in Vi and assume operational control. This proposal was contingent upon Vi receiving relief, which could attract additional investors.