AGR dues: Rejection of telcos’ plea not good for recovery of sector, say analysts

S Ronendra Singh New Delhi | Updated on July 23, 2021

The Supreme Court’s rejection of telcos’ plea for re-computation of AGR dues does not bode well for the recovery of the telecom sector and would mean that the service providers, including Bharti Airtel (Airtel) and Vodafone-Idea, will have to pay the dues per calculation of the Department of Telecommunications (DoT), according to analysts.

Sabyasachi Majumdar, Senior Vice-President and Group Head, ICRA Limited, said: “This will not bode well for the recovery in the sector and is likely to protract the same, given the elevated debt levels and very low tariffs. The industry is staring at high commitments towards debt repayments and DoT payments in the coming few quarters, with next major payments due in March-April 2022.”

In order to meet these, the industry participants will have to look for avenues of fundraising and/ or asset monetisation, in addition to focussing on substantially improving the average revenue per user (ARPU) levels, he said.

According to another industry veteran, the only option that the telcos have is to go for a curative petition, but that is very unlikely. “That is the last option and also rarest of the rarest case. Don’t think the TSPs would ask for more decisions as already they have been denied by the Supreme Court twice. The DoT calculations have been agreed by the Supreme Court,” the industry veteran said.

Earlier order

A Bench headed by Justice LN Rao referred to the earlier order passed by the apex court in the matter and said that no re-assessment of AGR-related dues could be done. In its September 2020 order, the Supreme Court had said that the telecom service providers (TSPs) should pay 10 per cent of the total dues amounting to ₹93,520 crore demanded by the Department of Telecommunications (DoT) in yearly instalments in the next 10 years (between April 2021 and March 31, 2031).

The apex court had in October 2019 delivered its verdict on the AGR issue. The DoT, in March last year, had moved a plea in the top court for allowing staggered payment of the dues by telcos over a period of 20 years.

The total demand per DoT’s calculation includes interest, penalty and interest on penalty on the outstanding amount, which amounts ₹92,641 crore (disputed actual demand is ₹23,189 crore, levy of interest of ₹41,650 crore, penalty of ₹10,923 crore and interest on penalty of ₹16,878 crore). According to DoT, the total demand from Airtel is ₹43,989 crore, which includesprincipal, interest, penalty and interest on penalty, and licence fee dues and spectrum usage charges. Airtel has already paid ₹18,004 crore till now.

Vodafone-Idea has paid ₹.7,854 crore till now out of the total dues of ₹58,254 crore. But, as per the company’s estimates its dues were pegged at ₹21,533 crore.

Shares of Bharti Airtel closed at ₹548.55 apiece on the BSE on Friday, up 0.38 per cent from the previous close, while Vodafone-Idea’s shares closed at ₹8.36 apiece, down 9.62 per cent from the previous close.

Published on July 23, 2021

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