New Delhi: The Supreme Court on Thursday upheld the government’s broader definition of revenue on which it calculates levies on telecom operators, dealing a 92,000 crore blow to an industry already reeling from a collapse in tariffs and mounting debt.

The top court rejected the definition of adjusted gross revenue (AGR) proposed by the telecom operators that excluded revenue from non-core telecom operations such as rent, dividend and interest income, marking the end of a 14-year-long legal tussle between the department of telecommunications (DoT) and operators.

Telcos will now have to pay the government 92,000 crore in unpaid spectrum and licence fee dues that have accrued over these years. Among the companies that have survived a brutal consolidation in the sector, Bharti Airtel Ltd and Vodafone Idea Ltd will be the worst affected by the order.

Telecom operators can now only hope that the government will reconsider its decision to apply the broader definition. They pay around 3-5% and 8% of AGR as spectrum usage charges and licence fees, respectively, to DoT.

Operators had argued that AGR should comprise revenue from telecom services, but DoT insisted that it should include all revenue earned by an operator.

Thursday’s judgement was pronounced by a bench headed by Justice Arun Mishra and comprised Justices S. Abdul Nazeer and M.R. Shah.

The judgement also makes it clear that service providers will also have to pay penalties and interest to DoT.

(Graphic: Paras Jain/Mint)
(Graphic: Paras Jain/Mint)

As the 153-page judgement does not contain the time frame for the payment of accrued dues, it is most likely that a separate order detailing the same would be uploaded on the court’s website soon. Telecom operators have asked for a minimum of six months to make the payment, which the bench said it would consider.

Clarifying further, Justice Mishra said there would be no further rounds of litigation in this case.

Expressing its disappointment, Vodafone Idea issued a statement saying the “judgement has significantly damaging implications for India’s telecom industry, which is already reeling under huge financial stress and is left with only four operators. Significant investment of several billion dollars has been made in creating world class networks. Today’s order has huge impact on two private operators, while most of the other impacted operators have exited the sector. We urgently request that the government engage on this matter in order to find ways to mitigate the financial stress for the industry."

Airtel also expressed its disappointment with the verdict and stated: “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. Of the 15 old operators impacted by the order, only two private sector operators remain in service today. The government must review the impact of this decision and find suitable ways to mitigate the financial burden on the already stressed industry."

The tussle started when telecom operators migrated to a new system offered by the government in 1999 under which they agreed to share a certain percentage of revenue with the government.

The case has seen multiple judgements by telecom tribunals and the final hearing by the Supreme Court was held on 1 August.

DoT, in an affidavit filed in the Supreme Court during its hearing earlier this year, had listed the revenue owed by the different operators to it. According to its calculations, Bharti Airtel will have to cough up an estimated 21,682.13 crore, Vodafone idea will have to pay roughly 28,308 crore. For Reliance Jio, the amount will be just 13 crore as it entered the sector only three years ago. BSNL owed 2,098.72 crore, while MTNL owed 2,537.48 crore.

These figures will be recalculated in line with the definition of AGR mentioned in the judgement of the Supreme Court.

The amount will also include interest, penalty and interest on penalty and ballooning liabilities of the telecom service providers.

Lobby group Cellular Operators Association of India (COAI) had challenged the definition of AGR and certain components included in AGR as being contrary to the Telegraph Act and the recommendations made by the telecom regulator in 2005.

Rajan S. Mathews, director general of COAI, said: “The telecom sector expresses its deep disappointment on the Hon’ble Supreme Court’s judgement on the definition of Adjusted Gross Revenue (AGR) which will have an impact of over 92,000 crore on the industry. The sector is already reeling under a daunting debt of approx. 4 trillion and is in dire financial straits as operators are making negative returns on their investments. The Supreme Court’s judgement is the last straw in contributing to financial distress and it remains to be seen whether the industry will be able to recover from this setback."