Govt must close 'legal disputes' hurting telecom: Sunil Mittal on AGR dues

Indian telecom is not “out of the woods” despite proving itself indispensable in the weeks-long lockdown to contain the spread of the coronavirus, said Bharti Airtel chairman Sunil Bharti Mittal on Tuesday, urging the government to "close long-standing legal disputes”.
The Supreme Court rejected on July 20 telecom companies’ demand for re-assessing their dues linked to adjusted gross revenue (AGR) and said it will decide later a government's plea to give the carriers a 20-year staggered payment timeline. The court upheld the amount to be paid by Bharti Airtel at Rs 25,976 crore and by Vodafone Idea at Rs 50,399 crore, factoring in the companies' payments of Rs 18,004 crore and Rs 7,854 crore.

"The company…is of the view that the telecom price-wars changed the landscape of the industry we have known and operated in till date and the Adjusted Gross Revenue (AGR) dues have caused significant distress in business sustainability for industry players," he said.
“The government must also look at rationalising the levies on the sector and close the long-standing legal disputes which are a drag on operators' performance,” Mittal said, apparently referring to the AGR dispute.
"While it’s clear that the worst may be behind for India’s telecom industry, we are yet to emerge from the woods. India still has some of the lowest data tariffs globally and the industry is barely able to cover the cost of capital. It requires much more support to repair the deep damage to its finances and make it viable for telecom operators to invest in future technologies," Mittal said in a message to Airtel shareholders.
ALSO READ: Airtel Africa reports $57 mn profit, falling 53% in constant currency terms
"Though the recent tariff increase has provided some cushion to the industry, we are still way below the levels to make the industry viable, said Mittal, 62.
"Given the commendable job it (telecom industry) has done to keep India connected, I hope the Government will look into the urgent needs of the operators."
Airtel’s Annual Report 2019-20 said that despite the coronavirus and lockdowns to contain the disease, the company has held on to its market share.
The company said it raised more than USD 8 billion over the year through rights issue, Airtel Africa IPO, Perpetual Bond, QIP (qualified institutional placement) and FCCB (foreign currency convertible bonds).
"The Indian telecom industry is now at a crucial transformational stage. From multiple players trying to claim shares of the market, now, after extensive consolidations, we have entered a 3+1 player arena. Yet, if our journey till date is any indication, we are confident about holding our ground," said the company’s report.
Bharti Airtel had more than 423 million customers across its operations at the end of March 2020. It owns and operates more than 42,053 telecom towers under its subsidiary Bharti Infratel Limited (on a standalone basis) with presence across all 22 telecom circles.

AGR dues: Telcos dial SC again, seek change in 90-day payment deadline

Three telecom operators on Monday filed a “modification application” in the Supreme Court, seeking a change in the 90-day payment deadline for dues on account of adjusted gross revenue (AGR) as well as permission to engage with the Department of Telecommunications (DoT) on the terms and timing of payment.
Bharti Airtel, Vodafone Idea, and the Tata group, including Hughes Telecom (which was later named TTSL Maharashtra), have requested the apex court to list their petition for urgent hearing on Tuesday, because the deadline for them to pay Rs 1.47 trillion as AGR ends on January 24.

The court, on October 24 last year, had ordered telecom companies to pay their licence fees and spectrum user charges (SUCs) within 90 days. Failure to do so could lead to contempt of court.
Spokespersons for the three companies and groups did not respond or comment on the matter.
According to sources in the DoT, the department will not do anything that is against the order.
The plea, apart from holding off the telcos’ earlier plan to go for a curative petition, is aimed at not only getting more time to make the AGR payment but also, if the apex court allows, negotiate with the DoT for a staggered payment scheme, just as it was able to get while paying for spectrum.
In the case of spectrum, the DoT agreed to a staggered payment scheme for 16 years with a two-year moratorium and an upfront payment of 25 per cent to 35 per cent, depending on the spectrum band that a telco bought. Responding to the financial stress in the industry, especially in the case of Vodafone Idea, the government recently offered another two years’ moratorium from next financial year.
chart
That would mean forgoing revenues of around Rs 50,000 crore temporarily for the next two financial years. However, failure to get relief would put the industry in major financial stress and, analysts say, could mean the end of the road for Vodafone Idea, which is highly leveraged and has made it clear that it will have no choice but to close down operations. The move, however, has hardly any impact on Reliance Jio, which has to fork out Rs 60 crore as AGR dues and, sources say, it is planning to pay the entire amount before the deadline. A query to Jio did not elicit any response.
Bharti Airtel, according to sources, will also have to pay Rs 2,100 crore arising out of dues on Telenor’s account (the firm merged with Bharti Airtel).
Sources said Sunil Mittal, chairman of Bharti Airtel, and Kumar Mangalam Birla, chairman of Vodafone Idea, were believed to have met Telecom Secretary Anshu Prakash on Saturday to discuss the dues and the way ahead for them.
Telecom companies are having discussions on a possible staggered payment plan. The Cellular Operators Association of India (COAI), the apex association of the industry, had suggested a 10-year payment scheme with a two-year moratorium, assuming that there would be no interest or penalty.
Companies say the government has earned about Rs 17,500 crore as licence fees and SUCs. “We are no longer questioning the amount that we have to pay. The important question is how we pay it in a staggered way, especially as most of the companies are public limited with shareholders and ensure it is a viable business,” said Rajan Mathew, director general, COAI.
The four companies appealing before the highest court have to fork out Rs 1,05,228 crore, based on the telecom department’s calculations.
Vodafone Idea has to pay the most: Rs 53,000 crore.
Based on these calculations, the three players have to pay over Rs 10,000 crore if they pay 10 per cent upfront this financial year or double the amount if it is pegged at 20 per cent. However, if the amount of all telcos is recovered, the upfront payment would be Rs 14,000 crore at 10 per cent and double that amount at 20 per cent.
The Tata group does not have any telecom business currently.

Row over AGR dues may cast shadow on 5G spectrum auctions: Experts

The row over adjusted gross revenue (AGR) in the telecom sector may cast a shadow over the proposed spectrum auctions as the firms that are expected to participate in the bidding are yet to gather clarity on the matter. Experts feel that if they made payments towards AGR settlement, the firms would grapple with funds for purchasing airwaves.
Besides buying spectrum for 4G and 5G services, mobile service providers are expected to make capital expenditure towards deployment of those airwaves.

“Deploying 4G and 5G spectra is a capital intensive exercise and no company is in a position to do that.
Vodafone Idea is yet to integrate spectra and Bharti Airtel has been consistently de-leveraging itself. Only Reliance Jio may look at the option of buying spectrum but even it said that the current prices are too high,” said a Mumbai-based analyst.
When asked, officials at the Department of Telecommunications said the process for the spectrum auction was on track. The date for the Digital Communications Commission (DCC) meeting is yet to be finalised and it will essentially decide the course of the spectrum auctions. Usually, DCC meetings are held once in two-three weeks.
The last such meeting was held in September, where Telecom Secretary Anshu Prakash, who heads the DCC, had said the process for the spectrum auctions was on track. The central government has not decided the auctioneer for conducting the bidding, even as Telecom Minister Ravi Shankar Prasad recently said the government would conduct the spectrum auctions in the current financial year.
There was no auction in 2017-18 and 2018-19. In 2016-17, the Union government raised Rs 65,789 crore through the sale of spectrum. Total spectrum put up for sale was 2,354.44 MHz across seven bands, buy the government managed to auction only 965 MHz or 41 per cent of the total airwaves.