Airtel has also bought the airwaves held by another bankrupt telecom operator Aircel Group, according to the Telecom Regulatory Authority of India (Trai)
The Supreme Court on Friday observed that under spectrum trading guidelines, past dues of a telecom service provider need to be paid before transfer of spectrum to a new buyer, failing which the liability passes on to the acquirer. A three-judge bench, headed by Justice Arun Mishra is hearing the matter of recovery of adjusted gross revenue (AGR) related dues from bankrupt telecom companies observed that
Bharti Airtel should be liable to pay AGR related dues of bankrupt Videocon Telecommunications with which it is in a spectrum trading pact with Ltd. "As per trading guidelines, past dues need to be paid before transfer of spectrum. If you don't pay, Bharti who acquired Videocon spectrum, will have to pay" Justice Arun Mishra observed.
Videocon which owes over ₹1300 crore to the government has sold its access spectrum in the 1800 megahertz band to Airtel, which owes ₹43,980 crore in AGR dues and is seeking an extended payment period from the apex court.
Airtel has also bought the airwaves held by another bankrupt telecom operator Aircel Group, according to the Telecom Regulatory Authority of India (Trai). While Aircel owes ₹12,289 crore in AGR dues, Videocon has a liability of ₹1,376 crore. If the apex court directs the telcos using spectrum of bankrupt companies to pay the past dues, then both Airtel and rival Reliance Jio Infocomm Ltd will be hit hard.
Reliance Jio has been using bankrupt Reliance Communications Ltd (RCom) spectrum under a sharing agreement since 2016, the launch year of India’s largest mobile operator. RCom owes ₹25,199 crore, including spectrum usage charges and licence fees.
Senior lawyer Harish Salve, representing Reliance Jio, and Kapil Sibal, for Airtel, said the companies have not received any notice from the department of telecommunications (DoT) on additional AGR dues to be paid for using the spectrums of bankrupt telcos. Govt hasn't yet claimed RCom's dues from RJio. RCom CoC has already made its submissions." He said, "DoT has raised demand on RCom and DoT is contesting RCom's resolution plan in NCLT. DoT told NCLT that spectrum can't be traded. If spectrum is not traded, it goes back to the government, it doesn't get any dues" salve told the apex court on Friday.
Both Salve and Sibal said the right to use spectrum is an asset of a telecom operator and, thus, used by banks as security to disburse loans to such companies. Interestingly, Salve added that the government will not be able to recover its AGR dues from bankrupt telcos if the sale of spectrum is not allowed under the insolvency resolution process. “SC is holding that spectrum cannot be sold, this will not help recover the AGR dues. If spectrum sale is not allowed, it will be returned to the DoT, auctioned for future use, and this would not help recover the AGR dues," Salve said.
Sibal highlighted that not treating spectrum as an asset of a telecom company may not bode well for telcos as it may affect lending by banks. “Spectrum is the most valuable asset with telcos taken as security by lenders. If the SC refuses to recognise the sale of spectrum, banks will stop lending to telcos, and this will grievously hurt the telecom sector," he added.
The Supreme Court directed the DoT secretary to file an affidavit detailing dues that are to be paid by users under spectrum sharing agreement. The court also asked the government to submit details on past dues, dates of grant and transfer of spectrum licenses. The court will hear the matter next on Monday.