In a big blow to the private telecom operators Vodafone Idea Limited and Bharti Airtel Limited, the Supreme Court has ruled against the private telcos in over ₹90,000 crore adjusted gross revenue (AGR) issue, leading Vodafone Idea shares to tank 23.26% as its entire cash balance of about ₹21,000 crore at the end of June may be wiped out as a result of the SC order.
The Supreme Court on Thursday ruled in favour of the government on the AGR issue, as a result the government can recover over ₹90,000 crore from the private telcos, enough to fund the revival package of ailing public sector telecom firms, BSNL Ltd and MTNL Ltd.
“Vodafone Idea is extremely disappointed by the Supreme Court judgement on the AGR case. The matter is 14 years old and pertains to the issue of whether revenue from other non-telecom related activities should be included in the AGR definition under the telecom licence conditions. The matter has already been through several rounds of litigation, which have been largely in favour of the operators until now,” said a Vodafone Idea statement.
Vodafone Idea shares on BSE touched its 52-week low of ₹4.10 before closing down 23.36% at ₹4.33 in a weak Mumbai market on Thursday, valuing the company at ₹12,442.42 crore. Vodafone Idea may file a review petition against the Supreme Court order.
“We will study the ruling as soon as it is available, along with our legal advisers, to determine next steps. If there are technical or procedural grounds for doing so, this could include a Review Application.”
The Supreme Court judgement has significantly damaging implications for India’s telecom industry, which is already reeling under huge financial stress and is left only two private sector operators remain in service today, of the 15 old operators impacted by the order.
“Today’s order has huge impact on two private operators while most of the other impacted operators have exited the sector. We urgently request that the government engage on this matter in order to find ways to mitigate the financial stress for the industry,” the Vodafone Idea statement added.
Sunil Bharti Mittal led Bharti Airtel is also disappointed with the Supreme Court’s order.
"We are disappointed by the verdict of the Supreme Court. The definition of AGR has been a long standing dispute between the DoT and the Telecom Service Providers (TSPs) dating to 2005. The issue of inclusion of revenue from non-telecom activities and interpretation of the heads included in the definition of AGR under the license conditions has been through several rounds of litigation, which have been in favour of the TSPs till now,” said Bharti Airtel in a statement.
Bharti Airtel shares gained 3.31% at ₹372.45 in weak Mumbai market on Thursday, valuing the company at ₹1,91,139.92 crore as investors started pricing in the possibility of a two player market.
“This decision has come at a time when the sector is facing severe financial stress and may further weaken the viability of the sector as a whole. The Government must review the impact of this decision and find suitable ways to mitigate the financial burden on the already stressed industry. We will be able to comment further only after reviewing the order in detail,” the Bharti Airtel statement added.
“These hefty payouts could fund the announced revival package (for BSNL and MTNL) and another two, perhaps, should the need arise,” analysts at Kotak Institutional Equities said in a note to clients.
