Govt to take legal view on Supreme Court’s Vodafone Idea order

A senior government official said the Center will seek legal opinion on the Supreme Court’s verdict on Vodafone Idea’s additional gross revenue (AGR) dues before granting any assistance to the beleaguered telcos.

While the apex court’s written order on Wednesday clarified that the dues were applicable only to Vodafone Idea, it observed that the petition filed by the company limited its claim only to the AGR claim submitted by the department of telecommunications (DoT) for the period up to 2016-17.

This is important considering that Vodafone Idea may not receive sufficient financial benefits if the assistance is limited to additional AGR claims of around 100,000. ₹5,600 crore.

Brokerage firm Emkay Global said in an Oct. 27 note that it sees the government’s chances of recovering the existing outstanding debt are low. ₹37,100 crore AGR dues of Bharti Airtel.

“We will take legal advice on the court order and then decide on possible steps (regarding providing assistance to Vodafone Idea). Legal review is being carried out for all cases,” a government official said, adding that the decision was under review.

Analysts at Emkay Global said the Center will now have enough space to prepare a plan for Vodafone Idea’s long-term sustainability.

“We note that Vodafone Idea’s leverage remains higher even without AGR dues and the government will also need to consider plans to reduce spectrum debt,” Emkay Global said in an October 27 note.

Vodafone Idea’s shares fell 7 percent ₹8.71 on the National Stock Exchange on Thursday.

What did the court say

The Supreme Court on October 27 allowed the Center to address Vodafone Idea Ltd’s complaints and reassess AGR dues.

The court’s order on Wednesday said relief was allowed considering the unique circumstances of the operator, where the Union government currently owns 49% of the telecommunications company serving nearly 200 million consumers.

“We clarify that this is a matter falling within the policy ambit of the Union of India and in the peculiar facts and circumstances of the case, there is no reason to restrict or hinder it if the Union of India wishes to reconsider the matter keeping in mind the larger public interest,” Chief Justice BR Gavai and justice K. Vinod Chandran said in the written judgment.

“We would also like to point out that the prayer in the petition confines its claim only to the additional AGR claim raised by the respondent for the period up to FY 2016-17. We further clarify that this order has been passed only in respect of Vodafone Idea Ltd, taking into account the unique facts and circumstances of the case,” he added, dealing a blow to rival operators like Bharti Airtel Ltd.