The Supreme Court on October 24 ruled in favour of the government on the AGR (adjusted gross revenue) issue. The telecom sector had earlier claimed that AGR includes only license and spectrum fees.
A bench led by Justice Arun Mishra, A.A. Nazeer and M.R Shah, gave the ruling. The government and the telecom sector (Bharti Airtel and Vodafone Idea) were in a fight over the definition of AGR (adjusted gross revenue).
Shares of Vodafone Idea and Bharti Airtel dip sharply after the order came in just after 1 pm.
Most noteworthy, at close of trade on BSE, Vodafone Idea had plunged 23.4% to Rs4.33, touching a 52-week low of Rs4.10. Bharti Airtel shares fell nearly 10% soon after the news, but had recovered to end 3.3% higher at Rs372.45.
Bharti Airtel said it was ‘disappointed’ by the verdict, which will ‘further weaken the viability of the sector as a whole.’
“We are disappointed by the verdict of the Hon’ble Supreme Court…This decision has come at a time when the sector is facing severe financial stress and may further weaken the viability of the sector as a whole,” an Airtel spokesperson said in a statement.
Industry body COAI said the Supreme Court ruling will deal a “disastrous blow” to the industry, given its precarious financial condition.
“The question that arises is whether this is the financial straw that finally breaks the back of operators,” Cellular Operators’ Association of India (COAI) Director General Rajan Mathews told a news agency.
“Telecom sector is under immense financial stress admitted by all stakeholders. Further demand of Rs92,000 crore will dampen the sentiment of telecom operators and raising funds for broadband, network expansion and Digital India will hit a significant roadblock,” said Prashant Singhal, Emerging Markets, Technology, Media and Telecom Leader, EY.
Moreover, he added that the impact will not be limited to just telecom operators but will have a domino effect on larger digital value chain. “This requires immediate intervention by all stakeholders to get the sector back in shape.”
The telecom sector had claimed through the unified operators association that the AGR only include license and spectrum fees.
However, the government on the other hand was insistent that it would include much else that would take the dues of the sector to thousands of crores.
In 2015, the TDSAT had ruled that it would include apart from license fees and spectrum user charges, rent, dividends and profits on the sale of assets.
Moreover, most operators have either exited the sector post the 2G ruling or are not doing well. The entry of Reliance Jio into the sector has only made things worse for the old players such as Bharti Airtel and Vodafone.