Bharti Airtel jumps over 6%, Vodafone Idea plunges 13% after Supreme Court verdict in AGR case

Telecom stocks traded mixed on September 1 after the Supreme Court announced its verdict with respect to adjusted gross revenue (AGR) dues case.

Bharti Airtel rallied 6.4 percent to Rs 546.75 and Reliance Communications gained 4.15 percent at Rs 2.51, whereas Vodafone Idea plunged 12.76 percent to Rs 8.89 on the BSE at close.

The Supreme Court in its judgement said it has allowed telecom companies for staggered payment of adjusted gross revenue (AGR) dues over the next 10 years. The 10-year payment timeline will begin from April 1, 2021.

Telecom companies will submit undertaking to pay AGR dues as per Supreme Court order and will pay 10 percent upfront.

Any default in AGR due payments would invite interest, penalty, along with contempt of Court, said the Supreme Court.

In case of spectrum sale, the court agreed that whether spectrum sale can be allowed under Insolvency & Bankruptcy Code (IBC) is to be decided by National Company Law Tribunal, reports CNBC-TV18.

"The initial announcements of paying AGR dues over 10 years is positive for telecom stocks like Bharti Airtel and positive for banking stocks who had huge exposure to the telecom sector," Vikas Jain, Senior Research Analyst at Reliance Securities told Moneycontrol.

"The SC verdict giving a ten year time frame for payment of AGR dues with 10 percent upfront payment can be regarded as reasonably fair. Since the SC has not said anything about the dues of Reliance Communications, Aircel and Vodafone, this is certainly very positive for Reliance Jio and Bharti Airtel. However, the 10-year time frame puts a question mark on the survival of Vodafone. Indian telecom industry moving to a virtual duopoly is not a desirable development," VK Vijaya Kumar, Chief Investment Strategist at Geojit Financial Services said.

Bharti Airtel as well as Vodafone Idea made hefty provisions with respect to AGR dues in March and June quarters 2020, and as a result, both had reported losses in same quarters.

During June quarter 2020, Vodafone Idea has recognized a charge of Rs 19,440 crore as an exceptional item towards the total estimated AGR liability, in addition to estimated recognized liability of Rs 46,000 crore as on March 31, 2020. Hence, company posted a consolidated loss of Rs 25,460.20 crore for June quarter 2020, against a loss of Rs 4,873.90 crore for the corresponding quarter a year ago.

Bharti Airtel in June quarter had further recorded an incremental provision of Rs 10,744.4 crore (including net interest) to give effect of the differential amount between DoT demand along with provision for subsequent periods for which demands have not been received, in addition to provision of 36,832.2 crore for the periods up to March 31, 2020.

Meanwhile, Bharti Infratel has informed the exchanges that its Board of Directors discussed, in a meeting held on August 31, the scheme of arrangement with Indus Towers and related agreements, and has decided to proceed with the merger.

Based on the adjustments, the company shared likely shareholding structure (subject to change based on agreed closing adjustments) as Vodafone with 28.2 percent stake, Providence Equity Partners (PEP) with 3.2 percent stake, total share swap for Indus as 31.4 percent, and Infratel shareholders with 68.6 percent in the merged company.

The merged company will see Airtel holding 36.7 percent stake, followed by Vodafone UK with 28.2 percent stake, and Providence with 3.2 percent stake, while the balance 31.6 percent will be held by public shareholders, CNBC-TV18 reported.

Singapore-based investment firm Integrated Core Strategies (Asia) acquired Rs 1,952.9 crore worth shares in telecom operator Bharti Airtel via an open market transaction on August 31.

It bought 3,80,10,584 equity shares of Bharti Airtel (representing 0.69 percent of its total paid-up equity) at Rs Rs 513.79 per share, bulk deals data available on the National Stock Exchange showed.

Disclaimer: "Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd which publishes Moneycontrol."