- Supreme Court on Thursday rejected the telecom plea seeking review of its earlier order that granted authorities to collect dues from them. The court didn’t find any justifiable reason to entertain the plea.
- ₹ 1.47 trillion is to be collected by 23rd January.
- The bench was headed by Justice Arun Mishra including Justices SA Nazeer and MR Shah.
- The hearing was conducted in closed chambers at 1:50 pm on Thursday, but Bharti Airtel & Vodafone Idea wanted an open court hearing.
- The government has raised around $13 billion against all telecom operators including defunct ones.
It seems like a 14-year long war between top telecom companies and authorities of India has finally come to an end. Supreme court has declined the plea of India’s top telecoms and asked them to pay their dues by the earliest.
Airtel expressed its disappointment against the verdict. The company said issues raised by telecom companies against the earliest verdict of the apex court were actually genuine.
“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 Bonafede and genuine,” the company’s spokesperson said.
Vodafone expressed their heartbreak by saying that if the government doesn’t offer relief, it would not be possible for Vodafone to carry on their business in India.
Some people think that with RIL Jio’s entry in the telecom sector, things started trembling. Which is one part of the story? But the dispute is older than JIO’s entry. With RIL JIO emerging, the issue became hot than ever before.
Let’s throw some light on the dispute
Adjusted Gross Revenue (AGR) is a share of telecom’s annual revenue that has to be paid to the government as a license fee.
A 15% AGR was decided initially which was brought down to 13% later. In 2013 it was again brought down to 8%. Following are the elements included in AGR:
- Installation charges.
- Value-added services.
- Interest income.
- Profit on the sale of assets.
- Insurance claim.
- Forex gain.
DoT claimed revenue share from all earnings should be under AGR while telecoms disputed this claim and filed a case in 2003 alleging that DoT has illegally included new elements mentioned above.
In 2015, TRAI excluded non-telecom revenue from AGR definition but DoT challenged TRAI’s decision.
Present Scenario in Telecom Companies:
The years-long war was heated up when RIL JIO entered the market and slashed down the rates. This was a bummer to all existing telecoms. Vodafone & Idea being affected more than anyone left with no option but to merge.
Their last hope, Supreme Court also rejected the plea of telecoms and ordering them to pay the amount by the earliest.
“The Supreme Court verdict is an interpretation of the license agreement and hence applies universally to all companies holding a telecom license. DoT is simply enforcing the court order by raising these demands,” said Harsh Walia, partner at corporate law firm Khaitan & Co.
The apex court verdict came after market hours and belied investor optimism. Bharti Airtel had closed 1.35% higher at ₹ 474.05 while the Vodafone Idea scrip closed marginally up at ₹ 6.03 on the BSE Thursday.
“The sector is already facing heavy taxes and levies in the range of 29% to 32%, which are globally the highest. 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. Impacted telcos would now await instructions from DoT on how to proceed with AGR payments… Ideally, DoT and the operators need to sit together and decide what would be the best course of action in the interest of the telecom industry and the citizens of India.” – said Rajan Mathews, director-general of the Cellular Operators Association of India (COAI), which represents private telcos.
For now, things are pretty clear. Supreme Court and authorities have asked all the telecoms to pay their debts as early as possible. It was a long war that was lost yesterday and now telecoms have no other option but to obey the verdict.
Bharti Airtel & Vodafone Idea strongly believe that with the amount that is to be paid to the government, they could have tested their 5G services in India. How genuine the comment is, is again questionable?
For years, telecom companies have imposed their hefty recharge packs and internet top-up packs on their customers. With JIO rolling out the internet and calls at really affordable rates, there was a tough fight for its rivals.
Now when the tables have turned around, telecoms are having a really hard time in not only retaining their customers but to maintain an optimum cash reserve.
All that is left is, how and when these companies will be paying to the government their respective share of debts.
Here are 10 things you need to know about Telecom companies in India & about the lost battle.