Budget data suggests some AGR dues payment likely in FY20: Goldman Sachs

Budget data suggests that government may be expecting to receive the principal portion of statutory liability from telecom firms in the current financial year itself, Goldman Sachs said on Monday.

In its latest sector report, Goldman Sachs noted that government has revised upwards expected proceeds in FY20 from 'Other Communication Services', and added that part of that could be attributed to recurring license fee/spectrum charges and deferred payment liability, an estimated $ 2.9 billion (roughly Rs 20,700 crore) are likely from other avenues.

"We note that this $ 2.9 billion is roughly equivalent to the principal-only component of Bharti and Vodafone Idea's combined AGR-related liability," it said.

The government on Saturday more than doubled its revenue estimate from the debt-ridden telecom sector to Rs 1.33 trillion for 2020-21 mainly on account of statutory dues derived from adjusted gross revenue (AGR).

The government in the receipt budget has pegged a revenue collection of about Rs 1,33,027 crore for financial year 2020-21 under communications head. It expects a revenue of Rs 58,686.64 crore under this head in the current fiscal year against budgeted amount of Rs 50,519.8 in 2019-20.

"The expected proceeds in FY21 per the budget indicates about $ 15 billion non-recurring payment from telcos (based on our calculations); however it is unclear if this only accounts for potential spectrum auction proceeds, or if there is any component of AGR liability in the amount," Goldman Sachs note added.

Telcos' ability to participate in spectrum auctions in the near term remains an uncertainty, it observed.

"As far as the FY21 proceeds of $ 19 billion (Rs 1.3 trillion ) are concerned, of which we estimate $ 15 billion from non-recurring payment (based on our estimate of industry revenues in FY21), telcos' ability to participate in spectrum auctions in the near term remains an uncertainty," it said.

This, it added, is especially true if Bharti Airtel and Vodafone Idea were to make substantial payments for AGR liability in the short term, it said.

Further, given Vodafone Idea's stretched balance sheet, it does not expect the company to participate meaningfully in spectrum auctions in the near term.

It is pertinent to mention here that 15 entities owe the government about Rs 1.47 trillion in past dues -- Rs 92,642 crore in unpaid licence fee and another Rs 55,054 crore in outstanding spectrum usage charges.

The Supreme Court, in October last year, had upheld the government's position on including revenue from non-core businesses in calculating the annual AGR of telecom companies, a share of which is paid as licence and spectrum fee to the exchequer.

In the case of Bharti Airtel, the liabilities add up to nearly Rs 35,586 crore, of which Rs 21,682 crore is licence fee and another Rs 13,904.01 crore is spectrum usage charge dues (not including the dues of Telenor and Tata Teleservices).

Airtel, which recently raised $ 3 billion through Qualified Institutional Placement (QIP) and convertible bonds route, is scheduled to announce its third quarter results on Tuesday.

Vodafone Idea, which is staring at unpaid statutory dues of Rs 53,038 crore, including Rs 24,729 crore of spectrum dues and Rs 28,309 crore in licence fee, has already warned of shutdown if no relief is given.

Most of the remaining liability is with state-owned BSNL/MTNL and some of the shut/bankrupt telecom companies.

Bharti Airtel, Vodafone Idea, and Tata Teleservices have jointly filed a modification application in the Supreme Court seeking more time to pay statutory dues.