Home / Industry / Telecom /  Trai recommends non-telecom activity be excluded from AGR

New Delhi: India’s telecom regulator has recommended that revenue generated by telcos from non-telecom activities such as financial investments and property rents be excluded while calculating adjusted gross revenue (AGR) that is used to decide how much these companies pay the government as revenue share.

Currently, India’s telecom operators pay 8% of AGR as licence fee and 6-10% of AGR as spectrum usage charge depending on the spectrum they hold. The new recommendation is part of the telecom regulator’s suggestions on the definition of AGR, an issue that the regulator had taken up for consultation with the industry.

In its latest recommendations, the Telecom Regulatory Authority of India (Trai) has suggested a new concept called applicable gross revenue (ApGR), which will consist of all telco revenue, less revenue from non-telecom streams as well as receipts from the Universal Service Obligation (USO) Fund. The AGR will then be computed by reducing fees that telecom operators pay each other to connect calls. Trai has also included a list of other income items called a positive list, revenue from which would be reduced from ApGR.

Deductions for service tax and value-added tax that the telcos pay the government should also be allowed, the regulator’s latest recommendations said.

“These recommendations would help in reducing the licence fee and spectrum charges outgo of telcos if the same is approved by DoT (department of telecommunications)," said Hemant Joshi, a partner at consulting firm Deloitte Haskins and Sells.

The definition of AGR is currently the subject of a major dispute between the telcos and the government. The dispute has gained prominence after DoT in 2009 commissioned audits of the accounts of telcos for the years 2006-07 and 2007-08 by Comptroller and Auditor of India-empanelled private auditors. The audits found that the five operators—Bharti Airtel Ltd, Vodafone India Ltd (then Vodafone Essar Ltd), Idea Cellular Ltd, Reliance Communications Ltd and Tata Teleservices Ltd—had understated revenue by more than 10,000 crore for the two-year period.

The telcos argued that the revenue that was not accounted for was from non-telecom streams such as investments (dividends, interest, etc.), real estate rent and sale, and other miscellaneous items. To this, DoT has said that this revenue would not exist without the telecom licence and spectrum, for which the telcos pay revenue share.

The telecom regulator also suggested the share of USO levy in the licence fee should also be reduced from 5% of AGR to 3%, effectively reducing the uniform licence fee to 6%, from the current 8%, without reducing the proceeds of the government from licence fee. The USO Fund is used by the government to provide telecom connectivity in economically unviable areas. The 20,000 crore national optical fibre plan that aims to connect 250,000 gram panchayats by December 2016 with high-speed optical fibre is being almost completely financed by the USO Fund.

Trai has also reiterated its recommendation that tower companies that hold the IP-1 licence should not come under the revenue-share regime. Other recommendations by Trai include moving of the revenue share payment to online systems and that existing systems for verification of revenue should remain unchanged.

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