World Economic Forum: Yediyurappa may go to Delhi on January 11, 12; not likely to visit Davos<\/a><\/strong><\/p>\nThe rating agency said the Supreme Court\u2019s adverse ruling, leading to a Department of Telecommunications (DoT) demand of Rs 1.47 lakh crore in unpaid dues on licence fees and spectrum usage charges from telcos before January 24, 2020, is credit-negative for the industry. \u201cThe DOT demand for unpaid dues pertains to a 14-year-old dispute regarding the definition of AGR, which the Supreme Court agreed that it should include all kinds of income generated by the telcos. Typically, telcos pay about 3-5 per cent of AGR as spectrum usages charges and 8 per cent as licence fees,\u201d it said.<\/p>\n
Fitch said relief on AGR dues, if any, is likely to come only from the Supreme Court as the government may be reluctant to intervene in the court process. \u201cHowever, it is uncertain if the government would allow payment of AGR dues in instalments over five or 10 years, subsequent to the court\u2019s ruling on the review petition,\u201d it said. Bharti filed a review petition in the court in November 2019 seeking relief on the unpaid dues, out of which interest and penalties constitute about 75 per cent. The court may rule on the review petition during January 2020.<\/p>\n
Fitch said Bharti\u2019s Indian wireless FY20 EBITDA is likely to rise by around 25-35 per cent, driven by a 30 per cent increase in blended average revenue per user to Rs 165 from Rs 128 in 2QFY20. The simultaneous announcement by all telcos to hike tariffs by around 30-40 per cent across different prepaid tariff plans, effective from December 5, 2019, is credit-positive and is the first such increase in tariffs in a decade.<\/p>\n
Also, Bharti announced this month that it will increase its minimum amount that a customer needs to pay to keep a number active to Rs 45 from Rs 35. \u201cBharti\u2019s free cash flow (FCF) will remain negative during FY20 despite tariff hikes, as cash flow from operations will be insufficient to fund large capex and moderate dividends of Rs 3,000-4,000 crore,\u201d it said. \u201cBarring regulatory dues, we expect FY20 capex\/revenue to remain high at 34-37 per cent, with forecast capex of around USD 4 billion, as Bharti continues to strengthen its 4G network and fibre infrastructure.\u201d<\/p>\n
However, negative FCF will improve following the government\u2019s two-year moratorium on payment of existing spectrum dues, which will save about USD 840 million in FY21 and FY22. Management expects its core capex, excluding deferred spectrum payments, to have peaked and to decline significantly in FY20 and FY21. \u201cWe expect the government to hold a 5G spectrum auction in the next 12-18 months. However, we believe the incumbents would be unlikely to participate if they had to pay AGR dues in the short term,\u201d Fitch said.<\/p>\n
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