The telcos paid 6045 crores to DoT: Relief for investors?

The news of AGR dues has been surfacing in the media from long which has affected long term investments in telecom sector. The dues have been pending for long time and account for a total of over 1.45 lakh crore rupees.

The leading telecom companies, Bharti Airtel, Vodafone Idea and Reliance Jio paid a total amount of 6045 crore rupees on Tuesday as an installment of the total dues in account of the purchase of airwaves in 2014. Out of the total amount, Reliance Jio paid 1053 crores, Bharti Airtel paid 1950 crore whereas the highest amount was paid by Vodafone Idea, which was 3042 crore rupees. However as per the Department of Communication (DoT), these are the regular payments and should not be confused with the pending AGR dues.

The payments have been made ahead of the visit of Vodafone’s CEO to India this week. He is supposed to have a meeting with Ravishankar Prasad, telecom minister. There are no official confirmations for the meeting.  Vodafone Idea, which was a merger of Vodafone India and Idea cellular, is struggling to pay its pending AGR dues and the survival of the company looks in danger. There was an unfavorable court verdict which has further shaken the investors.

In the Supreme court verdict, the government’s definition, based on which levies on telecom operators is calculated was upheld. This decision was a blow to the telecom industry and the worst hit by the verdict was Vodafone Idea which had the highest number of dues accounting for a whopping 50,000 crore rupees. So far, the company is able to pay around 3500 crores only.

This led to a decline of 0.58% of the shares of the company which is probably the result of selling volume in the stocks of the company. It is very important for the telecom companies to pay the dues, because defaulting on the same will make them vulnerable. They cannot risk getting their bank guarantees invoked by the DoT.

The government is trying to obtain a balance between the deepening crisis of the telecom sector, complying with the court orders on the AGR dues. It is very important to ensure the health of the sector in order to safeguard the interest of consumers and investors.

The telecom sector is already weakening in the Indian financial markets, and the court verdict against the telecom companies has further worsened the condition. This can be a risky affair for some investors, whereas some would consider it the perfect time for bottom fishing. It is not recommended to enter the telecom sector without proper experience and guidance. However, it is expected that the sector may provide returns in the long term, once the AGR issue is resolved.