Another AGR blow to India telcos – especially Vodafone Idea

India's Supreme Court has dealt a massive blow to Indian telcos, particularly Vodafone Idea, by rejecting their appeal to rectify the "errors" in the Adjusted Gross Revenue (AGR) calculations.

Bharti Airtel, Vodafone Idea and Tata Teleservices had filed an application to correct the calculation mistake by the DoT. They said Bharti Airtel had to pay INR130 billion ($1.74 billion); Vodafone Idea INR215 billion ($2.88 billion) and Tata Teleservices INR21970 million ($295 million).

Figure 1: Why does it always rain on me: Vodafone Idea has been left even farther out in the cold by the latest court decision.
(Source: Arti Sandhu on Flickr CC 2.0)

These figures are in sharp contrast to Department of Telecommunications (DoT) figures, which say that Airtel needs to pay INR439.8 billion ($5.9 billion), Vodafone Idea INR584 billion ($7.8 billion) and TTSL INR168 billion ($2.25 billion). Of this, Airtel has paid INR180 billion ($2.4 billion), Vodafone Idea INR78.54 billion ($1 billion) and TTSL INR41,970 million ($563 million).

This judgment severely impacts Vodafone Idea. It is supposed to clear off total debt of INR1800 billion ($24.1 billion). INR225 billion ($3 billion) needs to be paid between December 2021 and April 2022 for AGR and other dues to the government. The operator was hoping for some reprieve in the dues or the timeline in which it has to make the payment.

Money pit

The company has been trying to raise investment for several months now, but without any success. It is also not able to raise tariffs because of competitive intensity. The massive debt coupled with failure to raise funds has put a question mark over continued operations. It is India's third-largest telco with more than 200 million subscribers.

Last year, the Supreme Court granted ten years to the three telcos (Airtel, Vodafone Idea and Tata Teleservices) to clear the debt. The service providers were supposed to pay 10% of the total by the end of March 2021, and the next installment in March 2022. According to the service provider's calculations, they have already paid more than 10%, so they were not required to make any payment by March 2021.

This is clearly not the case going by today's judgment. However, it is not clear if the companies will need to pay any interest on the late payment of March 2021.

Shared experience

The judgment hits all the private telcos, barring Reliance Jio.

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The high debt will make it tough for them to invest in spectrum auction and network upgradation as they move closer to 5G launch next year. Vodafone Idea is left looking at a grim few months – and in need of an investment to help it sail through. On the other hand, Airtel could possibly gain if Vodafone Idea is forced to exit the market.

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— Gagandeep Kaur, contributing editor, special to Light Reading