The biggest trouble for the telecom sector at this point of time happens to be the Adjusted Gross Revenue (AGR) dues which the companies have to pay in the matter of a few days. The AGR dues deadline, as given by the Supreme Court is January 23, and the telecom companies are reluctant to pay these dues because of the extreme financial crunch which the telecom sector is facing right now. To seek some relief from the Supreme Court, both Vodafone Idea and Bharti Airtel had filed separate review petitions. But, it seems that the attempt of the telecom companies has gone in vain as the SC has rejected the review petition of the telecom companies. The AGR dues in total for the two telecom companies reach as high as Rs 90,000 crore, and for the telecom industry in total, they are north of Rs 1.47 lakh crore. To recall, the decision was passed by the Supreme Court on October 24, saying that the telecom operators have to pay the spectrum usage charges, license fees, interests, penalties and the interest on those penalties based on the new AGR definition before January 23, 2020.
Bharti Airtel Thinking to File Curative Petition
This new move has not been taken well by the telecom companies, Bharti Airtel and Vodafone Idea. While there has been no major reply from Vodafone Idea, Bharti Airtel has said that it is ideating on filing a curative petition. "While respecting the Hon’ble Supreme Court’s decision, we would like to express our disappointment as we believe the long-standing disputes raised regarding the AGR definition were bonafide and genuine. The industry continues to face severe financial stress, and the outcome could further erode the viability of the sector as a whole. The industry needs to continue to invest in expanding networks, acquiring spectrum and introducing new technologies like 5G. The money now required to pay punitive interest, penalty and interest on the penalty, which forms nearly 75% of AGR dues would have better served the digital mission of the country. We are evaluating filing a curative petition.”
COAI Also Shows Disappointment
Director of Cellular Operators Association of India (COAI), Rajan Matthews, which represents major telecom companies said, “The sector, which is currently reeling under a debt of INR 4 lakh crore, is a key contributor to the Indian economy in terms of consumer benefit, employment, revenue generation and contributes 6.5% to the GDP. The sector is already facing heavy taxes & levies in the range of 29% to 32%, which are globally the highest. The Supreme Court’s dismissal of the review petition is the last straw in contributing to financial distress, and it remains to be seen whether the industry will be able to recover from this setback. This added financial pressure on the sector will also adversely impact Hon’ble Prime Minister, Shri Narendra Modi’s vision of Digital India.”
Vodafone Idea Might Shut Shop
Vodafone Idea, Chairman, Kumar Mangalam Birla has already said that Vodafone Idea might have to shut shop if no relief comes from the government in terms of AGR dues. The only relief that the telecom companies have received till now is the two-year payment of moratorium for Rs 42,000 crore. Also, there has been no tax relief for the telecom companies, meaning that until now there has been no major relief. The payment moratorium will also only ease the balance sheet and not really make much of a difference.
AGR Now Includes Non-Core Items
In December month, the telecom companies also increased their tariffs by as much as 40% to help their revenue, but even that will be of little help given the quantum of dues. While Vodafone Idea has to pay Rs 53,000 crore in AGR dues, Bharti Airtel has to pay a total of Rs 35,500 crore in AGR dues. The decision from Supreme Court came in favour of DoT, as the SC said that the calculation of AGR would also include the non-core items as well and not only core telecom services. Since then, the telecom companies have been in distress and are finding ways in which they can pay off the dues or seek relief in the matter. Since the decision has come from the Supreme Court, the review petition was one of the ways relief could have come in telcos’ way.