AGR plea dismissal may hit ‘Digital India’

Apex court’s decision to take a toll on telecom companies’ fund-raising, investment capabilities

January 16, 2020 10:15 pm | Updated 10:15 pm IST - NEW DELHI

Dimming prospects: The payment will impact the larger value chain, including tower firms, say analysts. K. K. Mustafah

Dimming prospects: The payment will impact the larger value chain, including tower firms, say analysts. K. K. Mustafah

With the Supreme Court dismissing the petition by telecom firms to review its October 24 order on definition of adjusted gross revenue (AGR), industry and experts said that the decision would hit the fund-raising and investment capability of service providers, leading to adverse impact on the NDA government’s flagship ‘Digital India’ initiative.

Expressing disappointment over the decision, Bharti Airtel on Thursday said it was evaluating the possibility of filing a curative petition. The firm added that the money required to pay the interest and penalties on the pending dues, could instead be used for serving the ‘Digital India’ initiative.

Prashant Singhal, global technology, media and telecommunications (emerging markets) leader at EY told The Hindu , “This is a big blow... while there is still some hope with the option of filing a curative petition, the sooner the uncertainty is positively resolved, the better it is for the sector.”

Mr. Singhal added that the sector needed funds for upcoming technologies such as 5G and this decision would impact telecom companies’ fund raising and investment capabilities. “This will also impact the larger telecom value chain, including the tower firms and the equipment makers, and not just the telcos,” he said.

“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,” Bharti Airtel said in a statement.

It added that the industry continued 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 penalty, which forms nearly 75% of AGR dues, would have better served the digital mission of the country,” it said. Following the October 24 judgment in favour of the government, the telecom companies owe the government ₹1.47 lakh crore, of which ₹92,642 crore is the license fees and ₹55,054.51 crore is spectrum usage charge.

Bharti Airtel and Vodafone Idea are among the worst impacted by the order. In the case of Bharti Airtel, the liabilities add up to nearly ₹35,586 crore, of which ₹21,682 crore is licence fee and ₹13,904.01 crore SUC dues (excluding dues of Telenor and Tata Teleservices). In the case of Vodafone Idea, the number stands at a cumulative ₹53,038 crore, including ₹24,729 crore of SUC dues and ₹28,309 crore in licence fee.

‘Exploring options’

Vodafone Idea, whose chairman Kumar Mangalam Birla had earlier said that the company may have to shut shop if there was no relief on the AGR dues, informed the stock exchange that it was exploring further options, including filing a curative petition.

“The sector, which is currently reeling under a debt of ₹4 lakh crore, is a key contributor to the Indian economy... The sector is already facing heavy taxes and levies in the range of 29% to 32%, which are globally the highest,” Rajan S. Mathews, director general at Cellular Operators Association of India said. “The Supreme Court’s dismissal of the review petition is the last straw in contributing to financial distress and it remains to be seen whether the industry will be able to recover from this setback. The added pressure on the sector will also adversely impact Prime Minister Narendra Modi’s vision of Digital India,” he added.

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