SC Ruling On AGR Favours MTNL, Hits Voda Idea Stock

Mumbai, October 24: The Supreme Court (SC) verdict on the issue of adjusted gross revenue (AGR) proved to be a big booster for the Government owned-listed telcom firm MTNL, while it proved to be a yet another blow to the private sector telecom player Vodafone Idea Limited and it was a mixed bag for the Bharti Airtel stock prices on Thursday. 

The SC on Thursday rejected telecom companies' appeal against the government's definition of AGR and allowed the Department of Telecommunications (DoT to recover dues worth Rs. 1.33 Lakh Crore from telecom companies - Bharti Airtel, Reliance Communications (RCom) and Vodafone Idea, among others.

Department of Telecom calculates levies payable by operators. Telecom companies pay around 3-5 per cent and 8 per cent of the AGR as spectrum usage charges and licence fees, respectively, to DoT.During a hearing in June, the DoT had told the apex court that telecom companies owed a total of nearly Rs 92,642 Crore to the central government as on June 2019.It was a double barrel gains for the MTNL stock as yesterday the government had announced a revival package for the company along with the another government owned telecom company BSNL. 

The MTNL stock was listed in the five per cent upper circuit, at Rs 6.19. As compared to two-week average trading volume of 2.08 lakh shares, as the stock was locked in the upper circuit, only 34,000 shares changed hands at the BSE.Dealers said, another reason for the stock to remain demand was also because SC ruling, which rejected private telecom companies plea with regard to AGR. SC asked them to clear the dues of DoT to the tune of Rs 93,000 Crore. This sum, analysts said, will be used for the revival package for the government owned telecom companies MTNL & BSNL, which were merged into each other and the decision in this regard was taken at Wednesday’s cabinet meeting. Kotak Institutional Equities in its report released before the SC verdict termed the move to merge BSNL & MTNL as one of the boldest option available to the Government. 

It said, the government seems to have chosen the most audacious one. Revival of the two PSUs is not going to be easy unless pricing improves and industry revenues expand substantially – while there are some positive signs from Jio’s recent moves, this is not a given yet, or (2) one of the other players in the sector exits, thereby making the industry a 3-player market with the post-MTNL-merger BSNL being the 3rd one; this is a realistic scenario if the Supreme Court judgment in the AGR case goes against the telecom operators. Both Bharti and VIL are looking at hefty payouts should this happen. As an aside, these hefty payouts could fund the announced revival package and another two, perhaps, should the need arise!, the report said. The SC verdict came during the market hours and saw its impact on the Vodafone Idea stock, which plummeted by almost 23 per cent to close at Rs 4.35. Before that during the day it reached a new 52-week low of Rs 4.10. Whooping 7.26 crore shares changed hands on NSE. As compared to that, the more fundamentally strong Bharti Airtel stock gained 3.31 per cent to close at Rs 372.45.