CHENNAI: The Supreme Court on Monday (May 19) dismissed a writ petition filed by telecom companies Vodafone Idea (Vi) and Bharati Airtel, challenging the Department of Telecommunications' (DoT) calculation of Adjusted Gross Revenue (AGR) dues, legal news portal Bar & Bench posted on its X handle.
The companies had sought a waiver of interest and penalty components associated with its AGR liabilities. The court's ruling upholds the financial obligations levied on Vi, stemming from a protracted legal battle over the definition and calculation of AGR, which includes license fees and spectrum usage charges owed to the government.
AGR is a metric used to determine the revenue that telecom operators must share with the government in the form of spectrum usage charges or licensing charges.
Vodafone filed its petition seeking the interest waiver on AGR early last week, and followed by Bharti Airtel on Friday.
The dismissal of the curative petition has significant financial implications for Vodafone Idea. Currently, Vi's AGR liabilities reportedly amount to ₹70,320 crore, a substantial burden on the company's financial health. The company's debt profile is also at precarious level. As of the first quarter of FY25, Vodafone Idea reported a total debt of ₹2.09 trillion, which includes deferred spectrum charges and AGR dues .
Financial strategists project that Vodafone Idea's debt repayment obligations will commence in FY 2026, with negative cash flow expected to persist until financial year 2031.
Market Reaction
The market responded sharply to the Supreme Court's decision. Vodafone Idea's shares fell by 8.96% on Monday (at 1.48 pm) following the ruling, reflecting investor concerns over the company's growing liabilities.
Brokerages have expressed caution, with some firms maintaining a 'Sell' rating on Vodafone Idea's stock, citing the company's financial challenges and the AGR issue .
The Supreme Court's decision also has broader implications for the Indian telecom sector. The ruling reinforces the government's stance on revenue sharing from both telecom and non-telecom activities, potentially leading to further financial distress for cash-strapped companies in the sector.
Vodafone Idea, in the petition, emphasised that banks are hesitant to lend to the company, with some institutions reconsidering their support due to the unresolved AGR issue and the company's financial situation.
In light of the Supreme Court's decision, Vodafone Idea has expressed its intent to seek government intervention to manage its debt burden. The company maintains that its AGR curative petition had significant merits and continues to explore solutions to address its financial challenges .
