The payment stems from an amendment to the Contingent Liability Adjustment Mechanism, or CLAM, agreed at the time of the 2017 merger between Vodafone India and Idea Cellular. Under the revised terms of the implementation agreement, Vodafone Group promoters will release Rs 2,307 crore to Vodafone Idea over the next 12 months, according to regulatory filings by both companies.
In addition, Vodafone Group has earmarked its entire holding of 328 crore shares in Vodafone Idea for the benefit of the Indian operator. Vodafone Idea will have the right to instruct Vodafone to sell these shares in one or more tranches, with any cash proceeds transferred to the company. As of the date of the amendment agreement, the market value of the earmarked shares stood at Rs 3,529 crore, Vodafone Idea said in its filing.
CLAM pact revised ahead of deadline
The CLAM framework was designed to cover pre-merger contingent liabilities related to legal, regulatory, tax and other matters of the two merging entities. Vodafone’s maximum exposure under the mechanism was capped at Rs 8,369 crore at the time of the merger and, after payments already made, the reduced exposure was capped at Rs 6,394 crore. Following an extension, the deadline for the pact was December 31, 2025.
Consequent to the amended terms of the implementation agreement, Vodafone Idea said a sum of approximately Rs 5,836 crore is now receivable by the company.
AGR relief adds to momentum
The rally in Vodafone Idea shares also came against the backdrop of a PTI report saying the Union Cabinet on Wednesday approved a major relief package for the telecom operator, including freezing its outstanding adjusted gross revenue, or AGR, dues and granting a five-year moratorium on payments.According to the report, the measures aim to protect government interests, given the Centre holds about a 48.9% stake in Vodafone Idea, while ensuring competition in the telecom sector and safeguarding the interests of the company’s roughly 20 crore consumers.
The Cabinet, headed by Prime Minister Narendra Modi, agreed to freeze Vodafone Idea’s AGR dues at Rs 87,695 crore, with payments to begin in the 2031-32 fiscal year and extend through 2040-41, the PTI report said. The frozen dues will be reassessed by the Department of Telecommunications based on deduction-verification guidelines issued in 2020 and audit reports, with a government-appointed committee determining the final payable amount, which will be binding on both sides.
AGR dues are statutory payments owed by telecom companies to the government based on adjusted gross revenue, the base on which licence fees and spectrum usage charges are calculated. As part of the relief package, AGR dues for FY 2017-18 and FY 2018-19, finalised under a Supreme Court order in September 2020, will be paid over FY 2025-26 to FY 2030-31 without change. The PTI report pegged this at roughly Rs 120 crore a year, or between Rs 700 crore and Rs 800 crore over six years.
Company seeks clarity
Responding to a clarification sought by BSE, Vodafone Idea said after market hours on Wednesday: “We have not received any communication from the government in relation to the above-reported matter. As and when there is any development which requires disclosure, we will do the needful.”
Government sources cited by PTI said the move was taken in public interest and to avoid excessive concentration in the telecom sector.
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