NEW DELHI: The Supreme Court on Wednesday rejected review petitions filed by Bharti Airtel, Vodafone Idea and Tata Teleservices against its October AGR judgement, where it had directed telecom service providers to pay a whopping Rs 92,640 crore in dues, interest and penalties to the government by January 23.
While Bharti Airtel has said that it is evaluating filing a curative petition against the verdict, Vodafone Idea and Tata Teleservices have not reacted to the development yet.
“While respecting the Hon’ble Supreme Court’s decision, we would like to express our disappointment as we believe the long-standing disputes raised regarding the AGR definition were bonafide and genuine,” Airtel said in a statement.
“The industry continues to face severe financial stress and the outcome could further erode the viability of the sector as a whole. 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 the penalty which forms nearly 75 per cent of AGR dues would have better served the digital mission of the country. We are evaluating filing a curative petition,” the telecom major added.
In its October 24 judgement, the Supreme Court had sided with the Department of Telecom’s (DoT) view that adjusted gross revenues (AGR) should include receipts from the licence holders’ non-telecom businesses too.
AGR is the basis on which levies like licence fees and spectrum usage charges (SUC) are collected and the SC had directed telcos to pay pending licence fees, including interest and penalties, worth Rs 92,640 crore within three months of the order. According to the DoT, telcos also owe another Rs 55,055 crore in pending SUC charges arising from the SC-mandated definition of AGR.
Among the worst affected by the verdict are Bharti Airtel and Vodafone Idea, which are now faced with bills worth Rs 35,586 crore and Rs 53,038 crore respectively.
The verdict saw the two post record losses for the second quarter of FY20, with Airtel setting aside Rs
28,450 crore and VIL Rs 25,680 crore as provisions toward meeting AGR payments. Their cash balances at the end of September 2019 had stood at just Rs 20,800 crore and Rs 15,700 crore respectively.
The two have, over the past few weeks, begun gearing up to face the cash outflow. Airtel this week raised over Rs 14,000 crore in order to meet its cash requirements. “The company proposes to utilize the net proceeds for any payments that may be required to be made arising out of the judgment… in respect of the definition of adjusted gross revenue (AGR)," it had said.
But, while Airtel is expected to be in a position to cough up the money, its rival Vodafone Idea may not be. Last year, promoters Aditya Birla Group had indicated that they would not be in a position to infuse any more capital and may have to wind up the business in the absence of government relief.
While the recent tariff hikes have improved profit margins and the Centre’s moratorium on spectrum payments have reduced future cash outgo, analysts say that the absence of further relief may see VIL exit the business. “The recent price increase... is insufficient to fund the annual Capex and cash interest
requirement... Further, it continues to face survival risk in the event of no relief on its AGR liability,” analysts at Motilal Oswal Financial Services had said in a recent note.