The dismissal of the review petition by the Supreme Court of Airtel and Vodafone poses a stiff challenge to Vodafone Idea's survival while Airtel has prepared itself with funds to meet the payments on time, ICICI Securities Limited said.
Bharti Airtel has raised capital to meet the liability, but VIL remains challenged. Airtel last week raised capital of US $3 bn, which should help it meet its AGR liability with the help of additional debt.
VIL promoters, Vodafone Plc and Aditya Birla Group, have already mentioned that if the entire AGR liability has to be paid, they will have to shut shop.
"We don't see the situation for VIL being salvaged without government intervention. Apart from other stakeholders in VIL, the government too could be one of the most impacted parties if the company shuts down as it is owed Rs 900bn in deferred spectrum dues, besides the AGR liability," ICICI Securities noted.
"We also see indirect impact on PSU banks if VIL fails to cough up the money", it noted.
The Supreme Court has dismissed the review petition filed by telcos on its AGR ruling, which means the October 24 order continues to hold good.
Bharti Airtel and Vodafone Idea (VIL) have disclosed their potential AGR liabilities at Rs 343 bn and Rs 442bn respectively, which have to be paid by January 23. Bharti Airtel has already raised capital of US $3 bn, which should help it meet the burden.
"But the same remains a herculean challenge for VIL --a challenge that cannot be resolved without government intervention, in our view. We continue to prefer Bharti Airtel in the telecom sector as it is better prepared for a worst-case scenario on the AGR front in addition to its superior operational execution", I-Sec said.