Vodafone Idea, Bharti Airtel and Reliance Jio must decide by October 29 on whether they want to opt for a four-year moratorium on their dues.

In a letter to the telecom players, the department of telecom (DoT) also said the operators must decide within 90 days whether they would want to convert into equity the accrued interest during the moratorium.

“The option of conversion of the interest amount into equity shares shall apply only to those instalments covered by the moratorium and not to the subsequent instalments,” the letter said.

“The conversion of interest dues to equity will be a one time option to be exercised upfront. (Telcos) may opt for moratorium without opting for conversion of the interest into equity.”

“In that case, the interest shall be payable along with the AGR and spectrum dues on the due dates as per the term of the moratorium,” the letter said. A copy of the letter is available with The Telegraph.

Giving details of the shares, the letter said the present value of the accrued interest will be treated as a loan, which will be converted into equity.

“The present value of the interest on the deferred AGR-related and spectrum auction dues during the moratorium period shall be treated as a loan to the company and then converted from loan to equity shares in the company. The equity shares would be issued by the company to the government on a preferential basis.”

The relevant date for pricing of equity shares will be August 14, 2021.

The price of the equity or preference shares shall be the higher of the average of the weekly high and low of the volume weighted average price of the equity shares during the last 26 weeks preceding the relevant date or the two weeks preceding the relevant date, the letter said.

The DoT said “the NPV of the interest amount will be calculated as on the date of exercise of option. The interest amount will continue to be treated as a loan to the company till the completion of the equity infusion process”.

The letter covers one of the most important aspects of the relief package which was announced mid-September and is expected to be a lifeline for cash-strapped Vodafone Idea.

The letter made it clear that the telcos which opt for the equity conversion option must provide their historical audited financial statements. “Listed companies would also need to provide their historical share value,” it said.

Vodafone Idea and Airtel have made it clear that they would opt for the payments moratorium on their dues.

The cabinet approved a blockbuster relief package for the stressed telecom sector that includes a four-year break for companies from paying statutory dues, permission to share scarce airwaves, change in the definition of revenue on which levies are paid and 100 per cent foreign investment through the automatic route.

The measures, aimed at providing relief to companies such as Vodafone Idea, that have to pay thousands of crores in unprovisioned past statutory dues, also include the scrapping of spectrum usage charge for airwaves acquired in future spectrum auctions.

Voda Idea owes Rs 220-230 billion in annual spectrum and AGR liabilities, which will now be spread over the next four years, brokerage UBS said.

“This solves 80 per cent of its next two year’s problems. It still needs a capital infusion to address cumulative liabilities of Rs 120 billion over 2021-22 and 2022-23,” UBS said.

“Of this, Rs 64 billion is towards NCD repayments in 2021-22, starting Dec 2021 and Rs 49 billion in 2022-23. For Bharti, the annual savings from spectrum and AGR deferrals will be Rs 11,000-11,500 crore," UBS said in a report.