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Apex Court Dismisses Petition On AGR Issues; What Does It Mean For Telcos?

Major Telcom operators like Vodafone Idea and Bharti Airtel may have to undertake fundraising exercise or undertake asset monetisation. The Data rates may get hiked too in order to generate the money?

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The apex court on Friday dismissed the applications filed by telecom majors highlighting issues of 'errors' in the calculations of Adjusted Gross Revenue or AGR dues payable to them.

Petitioner's included leading mobile series providers like Vodafone Idea, Bharti Airtel, others.

All the miscellaneous applications are dismissed, a bench headed by Justice L Nageswara Rao said while pronouncing the order, according to news reports.

This means the already debt-laden telecom services space could see a possible increase in the data and services rates. After all these telcos will have to not only raise funds but also increase the ARPU or average revenue per user to generate cash. 

Sabyasachi Majumdar, Senior Vice President & Group Head, ICRA pointed out that the earlier order had clearly stated that no assessment could be done. "This will not bode well for the recovery in the sector and is likely to protract the same, given the elevated debt levels and very low tariffs. The industry is staring at high commitments towards debt repayments and DoT payments in the coming few quarters, with next major payments due in March-April 2022," he said.

"The Supreme court has quashed the AGR penalty re-computation request of the telcos, stating that the earlier order clearly states that no-assessment can be done," Majumdar pointed.

Now, in order to meet the payment of duea, the industry participants will have to look for avenues of fundraising and/or asset monetisation, in addition to focus on substantially improving the ARPU levels, experts said.

The top court had in September last year granted telecom companies a period of 10 years to clear their pending AGR dues to the central government with 10 per cent payment every year. The deadline given to the company for first instalment was March 31, 2021.

Why this case?

Telcos had pointed to the arithmetical errors in calculations regarding the AGR dues by the department of telecommunications. They had approached the top court to direct the telecom department to consider their submissions.

Vodafone-Idea and Bharti Airtel, owe substantial amounts to the DoT totalling over Rs 1 lakh crore. The total liability on Vodafone-Idea is Rs 58,254 crore, while Bharti Airtel has to pay Rs 43,980 crore and Tata Teleservices owes Rs 16,798 crore to the government.

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telecom apex court AGR Issues