Analysts say Bharti Airtel at lower risk, mixed views on Voda Idea sustainability
Bharti Airtel is better placed to offer guarantees for securing staggered payments, if permitted, in the AGR matter where the Supreme Court has asked private telcos for a road map on payment, timelines, and the security they can furnish, said analysts while airing mixed views on the sustainability of Vodafone Idea.
Higher liability and keenness on debt reduction will ensure pricing discipline in the sector, analysts said.
The Supreme Court on Thursday asked telecom companies, including Bharti Airtel and Vodafone Idea Ltd, to file an affidavit explaining the time needed by them to clear the remaining statutory dues that arose from the court verdict of including non-telecom revenues for calculating dues to the government.
"While reiterating that AGR dues have to be paid, the apex court indicated that staggered payment will be allowed only if guarantees for payments are given.
We see Bharti Airtel better placed to furnish guarantee," Axis Capital said in a note citing the company's fundraising drive, assets available for monetization and AGR payments already cleared.
Vodafone Idea (VIL) may also manage to furnish guarantee given large assets available with Aditya Birla Group, but its balance sheet would remain stretched, it added.
There is a strong possibility of Vodafone Idea to stay as a going concern if the petition for staggered payment of Adjusted Gross revenue (AGR) dues is accepted and the government/company takes steps to ensure its viability, Axis Capital said.
CLSA said Bharti Airtel's AGR risk is lower as it has already paid about Rs 18,000 crore (including adhoc payment) after fundraising, and it awaits final DoT demands.
"We believe with likely AGR relief in staggered payments and lower DoT final demand, Voda Idea will reconsider insolvency plans," it said.
Edelweiss said it believed deferred payment over 15–20 years is critical to sustaining a three-private-player market.
"We believe telco promoters are unlikely to hand out personal guarantees; instead, accepting terms such as licence cancellation, no dividend/buyback till repayment, etc look more feasible," Edelweiss said in its report.
Stating that it remains positive on Bharti Airtel on considerations of a strong network and balance sheet, it added overall given the higher liability for telecom companies and their keener focus on debt reduction, pricing discipline is expected to be maintained.
Credit Suisse said that the long-term viability of Vodafone Idea "continues to remain under a cloud", and maintained a preference for Bharti Airtel, which is said is well-positioned to benefit from the improving sector dynamics led by improvement in mobile pricing.
While VIL can manage its cash flow needs till FY22 mainly on account of a two-year moratorium on deferred spectrum debt, the company could find it "challenging" to service the AGR dues in case the tenure for staggered payment is short, say less than 10 years, the Credit Suisse note said.
ICICI Securities also cautioned that lower payment periods may increase payment burdens for VIL, amid indication that the company does not have enough cash for running operations.
For guarantees, Bharti is comfortably positioned, while VIL is in a tough spot, it said.
Motilal Oswal said the price increase is inevitable and that Vodafone Idea would need about 50 per cent hike in Average Revenue per User (ARPU) to support cashflow.
Citi, in its report, said that uncertainty for Voda Idea remains high.
"For the company to be able to repay its AGR dues and meet its enhanced cash flow requirements in FY23E (when the 2-year spectrum moratorium ends), this would require a combination of additional tariff hikes, equity infusion, tower monetisation, and rationalisation of levies, the quantum of which would vary with the time period agreed upon for repayment of the dues," Citi said.
