AGR (Adjusted Gross Revenue) is the basis on which the Department of Telecom (DoT) calculates levies payable by mobile operators.
Essentially, it is a metric calculated from a company’s gross revenues.
It is used to determine the levy to be imposed on the tele-income.
It is a fee-sharing mechanism between government and the telcos who shifted to ‘revenue-sharing fee’ model in 1999, from the ‘fixed license fee’ model.
In this course, telcos are supposed to share a percentage of AGR with the government
The AGR issue is a 14-year-old case.
It relates to mobile operators (telcos) locked in a legal battle with the government over the definition of the term AGR.
The telecom providers insisted that AGR should only include revenue from core operations (telecom services).
They say that other sources should be excluded from AGR calculations.
But, the DoT maintained that AGR also embraced non-core revenue (non-telecom services).
These include revenue from the sale of assets, interest on deposits, rental income and such like.
Ending the legal tussle, the Supreme Court in October 2019 rejected telcos’ definition of AGR.
It thus held that telecom companies have to pay fines and penalties on the unpaid fees, other than termination fee and roaming charges.
The Court allowed the Centre to recover over Rs 92,000 crore from the already financially stressed telecom industry within 3 months.
The order came as a major blow to the two incumbent operators, Vodafone Idea and Bharti Airtel.
This, in turn, forced them to hike tariffs.
In February 2020, the Supreme Court condemned the mobile operators for non-payment of dues.
The court warned them with contempt proceedings if they did not pay up the dues by March 17, 2020.
The Court said that its October 2019 order on revenues for calculating dues was final.
The two companies- Bharti Airtel and Vodafone Idea, sought some time to make the balance AGR payments.
They agreed to have their licences cancelled in case they failed to meet the deadline.
The total amount due as per the Department of Telecom’s submission to the Supreme Court is Rs 119,292 crore.
So far telecom players have paid Rs 25,896 crore. The balance payment of Rs 93,520 crore remains due.
The total liability on Vodafone-Idea is Rs 58,254 crore and Bharti Airtel was fastened with a total liability of Rs 43,980 crore, while Jio’s dues are at Rs 194.7 crore all of which have already been paid by the company.
DoT in March this year moved a petition in the Supreme Court to grant the firms a staggered period of nearly 20 years to clear the outstanding AGR dues to the tune of Rs 1.43 lakh crore.
DoT submitted that competition in the telecom sector and quality of services given by mobile companies will be adversely impacted and it will lead to loss of direct and indirect employment besides negatively impacting foreign investment sentiment.
But the court has observed that nobody can predict the next 20 years.
Presently, In a big relief to telecom companies, the Supreme Court has allowed telcos 10 years to make staggered payment of the pending AGR dues.
One can now easily read between the lines that with the verdict which is in favour of DoT’s (Department of Telecommunications) submission to the top court harm all the telcos except Reliance and create a less competitive market for telecom consumers and an elevated position to Reliance Jio due to its margin liability in the total amount.
Logically, if DoT as submitted in SC that competition, quality of services and employment would going to suffer due to verdict then what pressed them to move SC despite such an adverse view ?
Billionaire Mukesh Ambani’s Jio now has 34.8% wireless market share, while Airtel and Vodafone Idea have 27.8% and 26.8% respectively.
Vodafone Idea Ltd lost 4.8 million users in June, shedding customers for the eighth month in a row, even as rival Bharti Airtel Ltd narrowed the loss to 1.1 million.
Reliance Jio Infocomm Ltd was the only gainer in June, signing up 4.5 million new customers, showed data issued by the Telecom Regulatory Authority of India (Trai) on Thursday.
While the overall number of mobile subscribers declined in June, the fixed-line subscriber base rose by a marginal 40,000 to 19.8 million, amid the Centre’s focus to improve broadband connectivity. Jio, Airtel and Vodafone added 223,013, 25,256 and 6,854 wireline users in June respectively. BSNL lost 179,514 wireline customers in June.
Managements of both Airtel and Vodafone Idea have hinted at another round of tariff hike, aiming to lift Arpu(Average revenue per user) first to ₹200, and eventually to ₹300. The move will ultimately keep the consumers at loss.
Since the inception of AGR issue, it was clear that which telco would going to pay what amount if the SC pronounce it’s verdict in favour of DoT. This raises a question on DoT’s stand which made then to contend the issue at SC and then to take a U turn and ask the SC to adopt a liberal view on repayment schedule highlighting the adverse impact of SC’s ruling.
Tje verdict by the Supreme Court bench headed by Justice Arun Mishra, one of his last judgements before retirement, on the
AGR or adjusted gross revenues issue now lead to the formation of a duopoly in India’s telecom sector.
The verdict is one of the final judgements by Justice Mishra’s prior to his retirement on September 2.
Following the verdict, Vodafone/Idea is facing the largest financial burden, amounting to over Rs 54,000 crore. In the immediate aftermath of this judgment, the company’s stock price plummeted as talk proliferated of India’s telecom sector becoming a “duopoly.” Recent media reports have speculated that foreign investors, including US corporate giants, Amazon and Verizon, may be in discussions to acquire Vodafone/Idea.
RJio has made use of spectrum allocated to Reliance Communications (RCom), through a spectrum sharing agreement between the two companies.
The Supreme Court’s verdict meant that RCom too owed back-payments on its AGR to DoT based on the expanded definition of AGR.
The present verdict has ensured that this burden will not pass on to RJio, despite its spectrum-sharing arrangement with RCom, and it is left to the NCLT to decide whether the liabilities on account of the re-assessed AGR dues will pass on to RJio if it ends up formally acquiring RCom.
While it remains to be seen where the disputes go from here, there is little doubt that the real winner of the judgement of the bench headed by Justice Arun Mishra has been Reliance. Recently, Mukesh Ambani announced that RJio had developed an “entirely indigenous” 5G network capability with no components imported from China. In June, RJioappliedfor DoT’s permission to commence testing of its technology.
It can logically be inferred since inception of the issue at SC that the real winner in the AGR definitions’ game would only be Reliance and Justice Mishra is no exception of the recipient of the information yet the verdict so pronounced had and is going to harm the healthy competition in telecom sector in particular and the spectrum consumers at large.