Blow to Airtel, Vodafone Idea as Supreme Court dismisses AGR plea

  • Telcos will have to clear dues by 24 January or seek urgent help from government
  • The two telecom companies, along with rival Reliance Jio Infocomm Ltd, raised prices of their services by up to 47% in the first week of December

Navadha Pandey, Prathma Sharma
Updated16 Jan 2020
Vodafone Idea and Bharti Airtel have reported record losses for the September quarter
Vodafone Idea and Bharti Airtel have reported record losses for the September quarter(Mint )

The Supreme Court on Thursday dismissed pleas, including those of Bharti Airtel Ltd and Vodafone Idea Ltd, to review its earlier judgement that had asked telecom operators to pay more than 1 trillion of dues to the government.

Bharti Airtel, which has to pay 35,586 crore to the government by 24 January, and Vodafone Idea, which owes the government 50,000 crore, said they were evaluating filing curative petitions.

The court’s refusal to review its order is the latest setback for the telecom operators, which have reported record losses in the September quarter and are struggling under mountains of debt. Without any relief from the courts, the operators will now have to ensure that they pay the dues in about a week or seek urgent help from the government.

Graphic by Sarvesh Kumar Sharma/Mint

“There is very little chance of a curative plea being heard and that there may not be any fresh grounds,” said Saurav Kumar, partner at IndusLaw. “The government too may not tinker much with the order but surely can help to restructure payment deadline for dues. For Vodafone Idea, bankruptcy may be the next step if they can’t manage to raise funds. Promoters are unlikely to put fresh money in this.” Consumers will have to pay higher prices if the Indian telecom market turns into a duopoly, he added.

Bharti Airtel said the order will further erode the viability of the sector, which is already facing severe financial stress. “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 penalty which forms nearly 75% of AGR (adjusted gross revenue) dues would have better served the digital mission of the country,” Bharti Airtel said in a statement.

Bharti Airtel and other telecom operators had challenged the way the department of telecommunications (DoT) calculated AGR, based on which they pay licence fees and spectrum charges. Licence and spectrum charges are calculated at 8% and 3-5% of AGR, respectively.

The 24 October court order upheld the government’s definition of revenue, which defined AGR as all revenues of a licence holder including those from non-core telecom operations such as rent, dividend and interest income.

To be sure, Bharti Airtel has raised $3 billion and plans to use a portion of these proceeds to meet its AGR liabilities.

However, the future of Vodafone Idea is at stake. Last month, Aditya Birla Group chairman Kumar Mangalam Birla said the group’s telecom unit, Vodafone Idea, would have to “shut shop” if there was no relief from the government following the AGR verdict.

Tata Teleservices, which sold its mobile services business to Airtel, faces dues of 14,000 crore. An emailed query sent to Tata Sons was unanswered till press time.

In an exchange filing, Vodafone Idea said it is exploring further options, including filing a curative petition.

The tussle over the definition of AGR had started when operators migrated to a new revenue-sharing system offered by the government in 1999 under which they agreed to share a certain percentage of revenue with the government.

The October verdict also made non-telecom companies holding licences for internal communications and signalling liable to pay licence fees on their entire revenue, even if they do not offer consumer-facing telecom services.

DoT has sought 1.72 trillion from GAIL (India) Ltd, 22,168 crore from Power Grid Corporation of India Ltd, 15,019 crore from Gujarat Narmada Valley Fertilizers and Chemicals Ltd and 290 crore from RailTel Corporation of India Ltd by 24 January.

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