AGR Case Highlights: Supreme Court Verdict on AGR case, News & Updates

AGR Case Highlights: Supreme Court Verdict on AGR case, News & Updates

Last updated: 20 Jul, 2021 | 11:46 am

AGR Case Highlights: Supreme Court Verdict on AGR case, News & Updates

AGR case highlights - All you need to know

AGR, the beginning - The government in 1999 announced the National Telecom Policy, which gave the telecom companies an option to migrate from fixed license fees to revenue sharing fees. The fixed license fee was high, and companies mostly defaulted it. As per the new policy, 15 percent AGR (Adjusted Gross Revenue) was fixed as a license fee under the revenue-sharing model. The percentage was reduced later to 13 percent and then 8 percent in 2013.

The AGR issue - Telcos owe Rs 1.47 lakh crore to DoT. It includes Rs 92,600 crore as license fee and Rs 55,100 crore as spectrum usage charges. Of the total amount, Vodafone Idea owes a maximum of Rs 53,000 crore. The case is going on between telecom companies and DoT over the correct figure of AGR dues since 2003.

The latest verdict - The Supreme Court again heard the 18-year-old AGR dispute between the Department of Telecommunications (DoT) and telecom companies on July 19th. The apex court has reserved its order to not recommend any recomputation of AGR dues sought by Bharti Airtel, Vodafone Idea, and Tata Telecommunications.

Vodafone Idea's request - The company asked SC to correct the arithmetic error. The company has dues of Rs 58000 crore, and it requested SC to allow them to place their calculation in front of DoT and let them take the final call.

Bharti Airtel's request - The company has said that there is an obvious error in the computation of AGR like duplication, payments made not accounted for. DoT should look into these issues and errors. It will help Bharti Airtel save thousands of crore.

Tata Telecommunication's request - AGR has to be in accordance with the law just like any fee or tax. The judgment prohibits only re-assessment, SC has not barred rectification of calculative errors.

Solicitor General, Tushar Mehta has sought 2 days to reply on alleged arithmetic errors in DoT's calculations. He also said that he has no instructions from DoT, and it may be hazardous for him to make a statement without instructions from DoT. He said, 'Can take instructions from DoT if calculation errors can be corrected.

INDmoney Analysis: Outlook going forward

Vodafone Idea

  • Vodafone Idea is fighting for survival as it struggles to raise money to pay dues imposed by a Supreme Court decision in October on how spectrum and other fees are calculated.
  • The company’s ability to continue as a going concern is dependent on its ability to raise additional funds, successful negotiations with lenders on continued support, refinancing of debts and monetisation of certain assets.
  • Vodafone Idea’s gross debt, excluding lease liabilities stood at Rs 1.80 lakh crore. This comprises deferred spectrum payment obligations of Rs 96,270 crore, AGR liability of Rs 58,000 crore and debt from banks and financial institutions of Rs 23,080 crore. Net debt grew 54% on-quarter to Rs 1.79 lakh crore. Capex spend in the fourth quarter was Rs 1,540 crore.
  • The company has again reiterated that it will not be able to survive as a going concern, if it does not get relief in the AGR issue.

Bharti Airtel

  • Bharti Airtel is relatively better placed than Vodafone Idea. According to estimates by CLSA, given the tariff hikes and growth in earnings, the amount of outflow per year for Bharti Airtel will fall to about 6% of FY22e Consolidated EBITDA. Bharti Airtel remains comfortably placed to meet the AGR dues.
  • Tariffs have not increased for more than a year-and-a-half now. Following the recent announcement of the deal with TCS, the 5G rollout will help Airtel come out with new plans, which could be much higher in terms of tariff. It may also help the company in terms of ARPU growth. In the previous quarter, Bharti Airtel’s ARPU rose to Rs 145. The company has guided for an ARPU of Rs 200 over the long-term. The company is well positioned to gain market share from Vodafone Idea going forward.