InvestorQ : Will the Telecom relief package benefit the larger players like Jio and Airtel or will it benefit Vodafone Idea?
vidhya Laxmi made post

Will the Telecom relief package benefit the larger players like Jio and Airtel or will it benefit Vodafone Idea?

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sarah Leo answered.
3 months ago
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The telecom relief package did announce some important measures like 4 year moratorium on payments, excluding non-telecom revenues for AGR calculation in future, rationalization of SUC charges, 100% FDI in telecom via automatic route, surrender of spectrum, longer allocation period for spectrum and conversion of debt into equity. However, there are some major challenges for Vodafone; not so much for Jio and Airtel.

An important point will be that the interest cost on the moratorium will be a major irritant. The interest on the moratorium period will be charged at the rate of marginal cost of funds plus 2% premium on top of that. That is a steep cost as Vodafone has nearly Rs.70,000 crore outstanding. The interest cost will be so high that it could only worsen the financial solvency of Vodafone Idea and in the case of Bharti Airtel, they may not be really interested.

Rather than excluding the non-telecom revenues from AGR with prospective effect, it should have been done with retrospective effect. In this case, by not reducing the overall liability, the risk of insolvency still remains a very strong possibility for Vodafone Idea as its cash flows are unlikely to improve. Also, the conversion of debt into equity should have been done right away for Vodafone as that would have made its balance sheet attractive.

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