The Supreme Court on Thursday rejected the stance of telecom companies on the definition of adjusted gross revenue (AGR), in turn upholding the government's demand of around Rs 92,000 crore from the companies, giving a big jolt to operators like Bharti Airtel and Vodafone.
India’s incumbent telecom operators are already bleeding amid cut-throat competition from Reliance Jio, which had launched telecom services three years ago, promising free calls and cheap data. In this backdrop, the Supreme Court judgement will come as a big blow to them.
The government and the telecom operators have been at loggerheads on the definition of AGR and a battle had been ongoing for 14 years, between the operators and department of telecom (DoT). Telecom operators pay around 3-5 per cent of AGR as spectrum usage charges and 8 per cent of AGR as license fees to the DoT.
The companies had argued that AGR should include only the core telecom services that they offer. However, DoT had maintained that AGR should include revenue from non-core operations of the companies too.
The pending dues of all the telecom companies is estimated to be close to Rs 92,000 crore.
In a statement, Bharti Airtel said it was disappointed with the verdict.
“The telecom service providers have invested billions of dollars in developing the telecom sector and providing world-class services to consumers. This decision has come at a time when the sector is facing severe financial stress and may further weaken the viability of the sector as a whole,” it said.
In the last few years, several telecom operators have shut shop or merged with rivals, unable to survive in an environment where spectrum costs are high, but data charges are low and calls are practically free. Of the 15-odd operators in India at one time, today, the sector has only two surviving private players, apart from Reliance Jio and state-owned BSNL and MTNL. The cabinet had on Wednesday approved the merger of the two PSUs.
Bharti Airtel reported a net loss of Rs 2,866 crore in the April-June quarter. Rival Vodafone Idea reported a net loss of Rs 4,874 crore in the same period, and the AGR demand is clearly going to hurt them further.
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“The government must review the impact of this decision and find suitable ways to mitigate the financial burden on the already stressed industry,” Airtel said.
Vodafone Idea’s shares tumbled near 22 per cent to Rs 4.42 on the BSE after the Supreme Court’s judgement. Bharti Airtel shares also fell close to 10 per cent but recovered and were trading around Rs 375.80, up 4 per cent towards the end of trading.