In a relief to Bharti Airtel and Vodafone Idea, the Supreme Court Tuesday said that telcos could pay their adjusted gross revenue (AGR) dues to the Department of Telecommunications (DoT) over the next 10 years starting April 1, 2021.
These yearly instalments will have to be made by March 31 of every succeeding financial year and a compliance report by the companies as well as the DoT has to be filed by April 7 of that year, a three-judge bench headed by Justice Arun Mishra said.
If a telco fails to pay the stipulated AGR dues, contempt of court proceedings will be initiated against the company.
The interest on the AGR amount due for the year will also continue to accrue until the payment is made, the bench said.
An undertaking that the payments will be made on time will have to be submitted to the court within the next four weeks by managing directors of the telcos, while the bank guarantees they had submitted to the DoT shall be be kept alive for the entire duration of 10 years, the court said in its judgment. The total AGR amount owed to the DoT is Rs 1.43 lakh crore.
The AGR dues accrued to the DoT would have been much more but for a June 11 observation by the apex court in which it said that the AGR demand raised against non-telecom public sector units (PSUs) such as Powergrid, Oil India, and Gail among others, was “wholly and totally impermissible”.
The DoT had raised a total demand of Rs 4 lakh crore from non-telecom PSUs. The demand letters against the non-telecom PSUs were dropped after the top court’s observation.
For telecom companies, this is the third extension. On the first occasion, the SC had while upholding the DoT’s definition of AGR on October 24, 2019, given the companies three months to pay their respective AGR dues. The SC had then insisted that it would not extend the timeline beyond January 23, 2020. However, none of the telcos paid any monies until that date.
During the next hearing on February 14, 2020, the Justice Mishra-led bench came down heavily on the DoT as well as the companies for not paying any money till then. Following the hearing, all the telcos rushed to pay part of the AGR dues owed by them to the DoT. However, after that, despite nudges from the DoT, the telcos expressed their inability to pay any more until the issue was decided by the top court.
After requests from the DoT as well as telcos, the top court finally agreed to hear them on a revised payment schedule in March this year. The DoT had then suggested that the telcos be given a 20-year timeline to complete AGR payments.
Though the top court on Tuesday also ruled that 10 per cent of the total AGR dues owed to the DoT must be paid by March 31, 2021, both Bharti Airtel and Vodafone Idea have already made payments which exceed the stipulated amount. The companies now have time till March 31, 2021 to make their first payment, thereby safe from any outgoing cash flow towards AGR for the next 19 months.
The ten-year AGR payment schedule may come as a breather for Bharti Airtel though it had sought a payment timeline of 15 years from the SC. The Sunil Bharti Mittal-led company owed Rs 43,980 crore to the DoT as AGR, of which it has already paid Rs 18,004 crore.
The company still has to pay Rs 25,976 crore over the next 10 years, which can be paid in equal instalments between April 2021 and March 2031. Bharti Airtel’s stock rose to its highest since May and closed the day at Rs 549.5, up 7 per cent over the previous day close on the National Stock Exchange (NSE).
But the situation is grim for Vodafone Idea. The company will have to effectively shell out nearly Rs 1,280 crore every quarter to the DoT for the next forty quarters. The company had a total AGR due of Rs 58,254 crore of which it has paid only Rs 7,800 crore.
The company reported a net loss of Rs 25,460 crore in the April-June quarter this year, while its revenue during the same period declined 5.4 per cent on year to Rs 10,659 crore.
As of June 30, 2020, Vodafone Idea’s net debt, excluding its lease liabilities, was Rs 1.18 lakh crore. The company’s stock prices cracked following the SC verdict and ended 13.7 per cent lower at Rs 8.80 on the trademark index the NSE.
Tata Teleservices, which had in 2017 sold its consumer mobility businesses to Bharti Airtel, still has AGR dues worth Rs 12,601 crore, which can be paid by the company over the next 10 years.
In its judgment, the top court also said that the matter of whether spectrum could be sold under the Insolvency and Bankruptcy Court will be decided by the National Company Law Tribunal (NCLT).
There are four telecom companies, including Anil Ambani’s Reliance Communications, which are currently undergoing corporate insolvency resolution under the Insolvency and Bankruptcy Code, and owe a total of Rs 38,959.5 crore as AGR fees to the DoT.
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