Adjusted Gross Revenue bloodbath in its last stage - Voda Idea may collapse

The curtains are about to drop on a long-running judicial battle in Telecom sector, with catastrophic consequences for all players but one.

 Adjusted Gross Revenue bloodbath in its last stage - Voda Idea may collapse

---

• The story: The government's claims on telecom firms, for AGR - Adjusted Gross Revenues - have finally led to a bloodbath in the entire sector. Most firms have collapsed already, and now the last standing big firm too may.
• VodaIdea upset: The firm Vodafone Idea (Vi) said it is a “travesty of justice” and “inconceivable” that the Supreme Court (SC) has not allowed “errors” in adjusted gross revenue (AGR) calculations to be corrected, a ruling which will cost the cash-strapped telco around ₹25,000 crore and force it to shut shop.

1. In its petition to review the July 23 order of the court not allowing correction of alleged errors in the telecom department’s AGR calculations, the struggling telco said it had no intentions to “wriggle out” from paying its AGR dues as mandated by the court.
2. But if arithmetical mistakes are not allowed to be corrected, then it will have to shut shop, leaving nearly 280 million subscribers, some 20,000 direct and indirect employees, banks and retailers high and dry, with even the government getting hurt in the process.
3. The calculation errors will cost the petitioner approximately ₹25,000 crore (₹5,932 of principal plus interest, penalty and interest on penalty)

• Wrong impression: The company said that "the impression of this court that the petitioner is seeking to wriggle out of the orders on account of recalculation is completely misplaced, as would be evident from the error and mistakes illustrated before the court." It added that it was neither the intention of DoT nor the court to see the government "unjustly benefit" from excess AGR dues.

1. SC's order had confirmed the AGR dues at ₹58,254 crore, of which the firm paid ₹7,854 crore.
2. Vi had said there was double counting by the telecom department and some of the payments made were not included.
3. The telco’s own calculations put the AGR dues at ₹21,533 crore, which was disallowed by the top court.

• About to die: The petitioner claimed it was already struggling to survive and remained the third private wireless telecom operator in the country.
• AGR problem: Since early 2000s, all telecom companies operating in India paid a portion of their revenue to the Department of Telecommunications (DoT) as a licence fee and spectrum charges for accessing government-owned airwaves. The DoT stated in its definition of AGR that such corporations must cover all revenue collected, including revenue from non-telecom sources such as deposit interests and asset sales.

1. The telecom corporations challenged the definition of AGR in multiple courts, including the SC.
2. The firms claimed that AGR should comprise just the revenue accrued from the core services and not dividend, interest income or profit on the sale of any investment or fixed assets.
3. On 24 October 2019, the SC maintained the DoT's definition of AGR, ruling that because the licensee agreed to the migration packages, they were obligated to pay the dues, penalty on dues and penalty interest due to late payments.
4. The actual issue is not the definition of AGR but the length of time it has taken to reach a definitive conclusion on a 16-year-old disagreement.
5. A resolution was dragged through the courts until it reached the SC in 2019. In November (the same year), the SC ordered that the telecom players in question were collectively required to pay the government Rs 1.47 lakh crore within three months.
6. At that time, Airtel's total dues were estimated at around Rs 42,000 crore while Vodafone Idea's dues were approximately Rs 40,000 crore—these dues also included the penalties, fines, and interests that have accumulated throughout the legal dispute.
7. In 2020, faced with a massive bill of Rs 1.47 lakh crore on account of the SC judgement in the AGR case, India's cash-strapped telecom companies moved to the court again to seek relief from having to pay the entire sum by 24 January. In this huge sum, the two biggest private sector players, Vodafone and Airtel, owe the largest shares, and this is perhaps why Reliance Jio, which owes far lower sums due to its late entry into the business, is watching the fun from the sidelines.
8. Finally, the SC rejected all petitions, and ordered the telcos to payup.

• Summary: Effectively, the Indian telecom market has been reduced to a two-player race, with the second player Airtel also struggling. Mukesh Ambani of Jio is laughing all the way to the bank.

Join PT courses | PT Youtube | PT App | Contribute |  Testimonials