Analysts expect Vodafone Idea Ltd. to face massive payment obligations after the Supreme Court granted telecom operators 10 years to pay thousands of crores worth of statutory dues stemming from the revised definition of adjusted gross revenue, prompting the carrier to further hike tariffs to sustain business.
Bharti Airtel Ltd., on the other hand, may benefit as the Sunil Mittal-led telecom service provider is expected to generate healthy cash flows, helping it to comfortably pay the annual installments, according to the reports of research firms, including Morgan Stanley, BofA Securities and Motilal Oswal.
The Supreme Court in October 2019 had ruled that non-core revenue must be included while calculating statutory levies, ending a 14-year-old legal battle between mobile operators and the government on the definition of AGR. That had increased the liabilities of Bharti Airtel and Vodafone Idea to more than Rs 90,000 crore at a time they were locked in a brutal tariff war with Mukesh Ambani's Reliance Jio Infocomm Ltd.
While the apex court granted more time to the carriers, they will have to pay 10% of the total dues by March 31, 2021. This indicates those telecom firms that have already paid 10% or more of total dues will have to make the next payment in 2022. There will also be an 8% interest on the pending dues during the extension that's been granted by the top court.
Of the 19 analysts tracking Vodafone Idea, 10 have a ‘sell' rating, two recommend a ‘buy' and the rest suggests a ‘hold'. The average of Bloomberg consensus 12-month target prices implies a downside of 16.7%.
For Bharti Airtel, 28 of the 29 analysts recommend a ‘buy', and no ‘sell' rating. The The average of Bloomberg consensus 12-month target prices implies an upside of 27.7%
Here's what analysts have to say:
