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Telecom sector in stress

Date: 03 November 2019 Tags: Services

Issue

The Supreme Court of India upheld the Department of Telecom (DoT)’s interpretation of adjusted gross revenue (AGR). Following the order, the telcos are now staring at dues of an estimated 1.4 lakh crore, which needs to be paid to the government within three months.

 

Background

The telecom industry is reeling under a debt of over 4 lakh crore and has been seeking a relief package from the government.

The government recently announced setting up of a Committee of Secretaries to examine the financial stress in the sector, and recommend measures to mitigate it.

 

Details

  • The definition of AGR has been under litigation for 14 years. While telecom companies argued that it should comprise revenue from telecom services, the DoT’s stand was that the AGR should include all revenue earned by an operator, including that from non-core telecom operations.

  • The AGR directly impacts the outgo from the pockets of telcos to the DoT as it is used to calculate the levies payable by operators.

  • Telecom companies now owe the government not just the shortfall in AGR for the past 14 years but also an interest on that amount along with penalty and interest on the penalty.

  • The total amount to the government is owed by about 15 operators. However, 10 of them have either closed operations or are undergoing insolvency proceedings in the last 14 years.

  • Of the current players, Bharti Airtel and Vodafone Idea are the most affected by this order. While the total dues of Bharti Airtel are estimated to be about 42,000 crore, for Vodafone Idea the amount is around 40,000 crore.

  • The committee will consider some of the long-standing demands of the industry, including granting a delay in payment of dues for spectrum for the next two financial years (2020-21 and 2021-22).