Adjusted Gross Revenue (AGR)

Adjusted Gross Revenue (AGR) is the usage and licensing fee that telecom operators are charged by the Department of Telecommunications (DoT).

Now the dispute is over this amount, what are the particulars to be considered in calculation of this amount.

History of Issue

As per DoT the AGR includes whole income generated by telecoms including their non telecom income like interest on deposits and asset sales etc. while telecoms of other point of view that only revenues from telecom services should be part of AGR calculation.

The issue is related to period 2005-06 when cellular operators Association of India challenged govt’s definition of AGR calculation.

Later in 2015, the TDSAT said AGR included all receipts except capital receipts and revenue from non-core sources such as rent, profit on the sale of fixed assets, dividend, interest and miscellaneous income, etc.

But DoT has moved to SC saying TDSAT can’t decide AGR definition given by it.

Now, Supreme Court has backed the broader definition of AGR and has given time of 3 months to telecoms to deposit the amount of Charges, Interest, Penalties and interest on penalties.

Ruling Effects

Vodafone Idea & Bharti Airtel are two major companies affected most by the SC ruling.

With this ruling Vodafone Idea could be heading towards bankruptcy unless govt grants some reliefs to telecoms.

Airtel and Vodafone Idea – already facing pressure on revenue and profitability due to a price war since Reliance Jio’s entry in 2016 – and high debt, will be imposed with a huge burden.

The two telcos “have not created any provisions against these liabilities, and any payments, if they arise, will put an additional strain on their already stretched balance sheets.

Summary of Amount Payable

Telecom Principal Interest Penalty Total Combined O/s
Airtel 4883 12822 2120 19825 22942
Tata Group 705 1940 275 2920
Telenor 78 87 32 197
Vodafone Idea 1004 2296 385 3685 11001
Vodafone Group 1841 4610 865 7316
Aircel 481 1273 252 2006 2006
RCOM 744 2316 471 3531 3531
R.JIO 16 4 8 28 28
Others 1455 1455
Total 9752 25348 4408 40963 40963

Way Forward

If the telecoms are not provided relied then they may bankrupt leading to increasing the NPAs and worsen impact on struggling India’s telecoms.

Options with Govt

May allow amortization period to pay the amount in installments in 10-15 years tenure.

Recommendation :

Stay away from telecoms until the dusty clouds clears.

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