Supreme Court rejects AGR appeal

17 Jan 2020

India’s Supreme Court has rejected appeals from cellcos Vodafone Idea, Bharti Airtel and defunct provider Tata Teleservices to review elements of its October 2019 decision on Adjusted Gross Revenue (AGR) calculations, the Economic Times reports. Last year’s ruling established that AGR – from which operators’ licence and spectrum fees are calculated – should include revenue from non-core activities, handing the sector a bill estimated to be around INR1.47 trillion (USD20.7 billion) to be paid within just three months (i.e. a deadline of 23 January 2020). The providers had sought a limited review of the order rather than completely overturning the ruling, with the hope of cutting back the financial impact of the decision. The Supreme Court yesterday rebuffed the appeals, saying that it ‘did not find any justifiable reason to entertain the review petitions’.

Industry lobby group the Cellular Operators Association of India (COAI) expressed its frustration at the decision, which has added further pressure to the sector which was already in the midst of a financial crisis. COAI DG Rajan Mathews was quoted as saying of the ruling: ‘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’. Indeed, the decision has fuelled further speculation that the sector may be reduced to just two privately-owned operators and a state-backed provider. Vodafone Idea Chairman Kumar Mangalam Birla warned in December last year that it would struggle to pay the AGR demand and would face closure if it did not receive any relief from the government. The telecom department said it was unable to intervene in the matter unless directed by the Supreme Court, however. An unnamed senior Department of Telecommunications (DoT) official was quoted as saying of the matter: ‘We are confident Bharti Airtel and Tata Teleservices will meet the deadlines but Vodafone Idea in all meetings with us has made it very clear that it has no money to pay.’ The official went on to add that the government could not rule out that Vodafone Idea would not join Aircel and Reliance Communications (RCOM) in insolvency.

In a related development, a group of non-telco public sector undertakings (PSUs) that have been handed demands as a result of the AGR ruling will go ahead with their own appeals to the Supreme Court. The group includes utility firms GAIL India, Oil India, Power Grid Corporation and others, which are not service providers but nevertheless hold telecom licences and are facing an AGR-related bill estimated to total around INR3 trillion. Solicitor General Tushar Mehta has suggested that the PSUs may receive a different ruling from the apex court as ‘government companies have a different clause than telecom companies’. Following the October ruling, the government confirmed that the AGR definition would be applied to all licence holders, regardless of their circumstances or whether they were party to the original dispute. The PSUs have, however, claimed that the court has incorrectly bundled all types of concession holders together and that the AGR definition is different for holders of other types of licence.