Vodafone Idea and Bharti Airtel Might Get Relief as Govt Discusses Reduction of License Fees

Currently, the biggest issue plaguing the telecom industry is the issue of Adjusted Gross Revenue (AGR) which has put undue pressure on the telecom companies to pay off exorbitant amount to the government. It is because of the pressure of these dues that the telecom companies have had troubled balance sheets since the last few months. However, as per a new ETTelecom report on the matter, the situation of the telecom operators might ease a little bit as these companies might get a cut in license fees. Out of all the dues that the telecom companies have to pay to the DoT, a large chunk is made up of the license fees, and hence this would be the second step in the relief that is to be provided to the telecom companies in the case of AGR issue after the two-year payment moratorium. As per the existing rules, the telecom companies have to pay 8% license fees to the DoT. But, if the new measure kicks in and the government decides to lower the license fees, then they would be paying somewhere around 5% or 6% in license fees.

License Fee Reduction Still Not Enough Relief

The information comes from two senior government official who have remarked that a meeting is scheduled on the highest level of the government to discuss the lowering of license fees. If the analysts are to be believed, then the three telecom operators would be saving Rs 4,000 to Rs 5,000 crore annually. But, even then, the cut in license fees would not be sufficient enough to bring relief to the troubled balance sheets of telecom companies, especially Vodafone Idea and Bharti Airtel.

The issue of AGR on the telecom industry has come up because the Supreme Court, in its decision, made on October 24, said that the definition of AGR would be widened to include the non-core operations as well. This increased the dues that the telecom companies pay over the AGR such as the license fees, the spectrum usage charge, and the penalties and the interests which come over it. As a result, now, the telecom companies, Airtel and Vodafone Idea, both owe more than Rs 90,000 crore to the DoT combined. While Airtel has dues worth Rs 35,500 crore, Vodafone Idea has dues worth Rs 53,000 crore.

Review Petition Yet to Bear Fruits for Telecom Companies

A senior official from the government said, “The government cannot do anything about the AGR dues, which has been decided by the Supreme Court. From the initial suggestions of relief measures, a licence fee cut will be taken up now following the two-year spectrum moratorium already announced.”

To recall, a Committee of Secretary (CoS) was formed to discuss the relief measures that could be extended to the telecom operators. In these discussions, the secretaries had discussed that the relief measures would include steps like two years payment moratorium giving the relief to telecom companies for Rs 42,000 crore. Apart from this, the secretaries had also discussed the idea of reducing license fees, but there was no conclusion in sight.

The telecom companies under pressure, Vodafone Idea and Bharti Airtel have also filed a review petition in the Supreme Court after the verdict which was given in October. To recall, the Supreme Court had asked that the companies should pay up the dues within three months without any delay. Analysts are also of the opinion that move towards relief measures would be the right one since it would fix the balance sheets of the telecom operators.

Arpit Sharma

Arpit spends his day closely following the telecom and tech industry. A music connoisseur and a night owl, he also takes a deep interest in the Indian technology start-up scene and spends rest of his time spilling poetry and stories on paper.

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Arpit Sharma