Payment Moratorium Relief for Telcos The analysts have also shared their views on this new development. As per a new ET Telecom report, the new move by the government to provide a two-year payment moratorium will bring some cash flow relief to the telecom operators. Jefferies has said in its note, “We expect the government to put a moratorium on AGR dues for the next two years, aiding cash flows. A reduction in license fee (helps Bharti/Voda Idea’s EBITDA by 5%/28%) and an extension of IUC are also likely.” This relief has been brought forth by the cabinet of ministers who have approved the payment moratorium for the telecom operators. Goldman Sachs has also made some comments on this new move saying that although it will ease the cash flow problems of the telcos, especially for Vodafone Idea, it won’t better the balance sheet leverage of the telecom operators which seems to be 20x net debt to EBITDA as of September 2019. The main relief for Vodafone Idea from this payment moratorium would be related to AGR dues. More Help Expected from the Government “The moratorium amount of $3.3billion for Vodafone Idea and $2 billion for Bharti Airtel could be quite meaningful from a near-term liquidity standpoint for these telcos,” Goldman Sachs said. It also said that the two-year moratorium would allow both these telcos to potentially save $2 billion and $3.3 billion, respectively, which is 41% and 52% of their respective AGR-related liability. The thing to note here is that while the payment moratorium will ease things for Vodafone Idea cash flow wise, it won’t have an effect on the balance sheet leverage. There has also been expectation of an interest rate reduction, but that has not been incorporated yet. Tariff Hike Not Enough Starting December, telecom operators, including Reliance Jio, and BSNL have also announced that they would be increasing tariffs. This increase in tariffs could be a turning point in the industry as it tries to get back up from the pit of losses. As per Jefferies, more relief from the government can be expected in the coming days, as they will definitely need support around the issue of AGR dues even with the recent price hike. In the next few months, the pricing of the sector is expected to improve by 25 to 30% which will be a turnaround for the industry which has been in Rs 7 lakh crore in debt for a long time now, and is now also under dues of Rs 1.3 lakh crore.
