Vodafone Idea and Bharti Airtel Might Have to Pay Higher License and Spectrum Fees

Indian telecom operators might have to shell out as much as Rs 41,000 crore in additional spectrum usage charges (SUC) if a matter falls in favour of the government regarding the definition of adjusted gross revenue (AGR) which is currently going on in Supreme Court. As per a new ET report, this figure will be asked from the telecom companies over the Rs 92,000 crore which has already been asked from the telcos in the name of penalties and license fees. The government is adamant on the fact that AGR constitutes the entire revenue of the company, whereas the telcos have resisted saying that the AGR only includes core services.

Bharti Airtel and Vodafone Idea to Take the Most Hit

Out of the total spectrum usage charges that the Department of Telecommunications (DoT) will ask from the telecom operators, 85% will be demanded from Vodafone Idea and Bharti Airtel. As per the estimates calculated by DoT, the Sunil Bharti Mittal led telco will pay somewhere around Rs 22,940 crore which would include interest and penalties. Whereas, the dues for Vodafone Idea have been pegged to be around Rs 11,000 crore. Even though the matter of spectrum usage charges does not factor into the argument which is ongoing in the Supreme Court, if the order on the definition of AGR comes in favour of the government, the DoT will have a strong basis to retrieve these dues from the telecom operators.

An official of DoT aware of the legal matters said about this new development, “We can proceed with spectrum usage charge demands once the AGR ruling comes in.” On the matter of deciding the proper definition of AGR, the Supreme Court had reserved its order. It is worth noting that spectrum usage charges and license fees are both calculated on the basis of AGR. As per the government, the AGR should include dividends, handset sales, rent and profit from the sale of scrap, whereas the telcos say that the AGR’s scope is limited to the revenue from telecom services alone.

Financial Burden for Telcos Might Increase

Currently, the spectrum usage charge is billed as 3% of the AGR. The current method of calculation of AGR includes some non-core elements as well. The DoT is bullish on receiving the pending dues which it will get if the order from SC falls in its favour. But, if that happens, then the already cash burdened telco Vodafone Idea will have another liability on its shoulder. Currently, the telecom operator is facing financially tough times after being bruised by the data tariff war.

In the FY19, the telecom sector’s AGR has decreased by 25% to Rs 1.39 lakh crore. This figure was previously Rs 1.85 lakh crore in FY17 as per the government data available. Rajan Matthews, Director General of COAI (Cellular Operators Association of India) said that the amounts could be very large and it is very worrisome for the telecom operators. The COAI represents all the telecom operators in the industry.