Latest Indian AGR ruling is very bad news for Vodafone Idea

Latest Indian AGR ruling is very bad news for Vodafone Idea

The long-awaited Indian Supreme Court judgement on three telecommunication companies’ assertion that their adjusted gross revenue (AGR) dues have been miscalculated is in – and the result isn’t good for Bharti Airtel, Vodafone Idea (now known as Vi) and Tata Teleservices.

The Supreme Court on Friday rejected the appeal by the three companies to allow the correction of alleged errors in the Department of Telecommunications’ (DoT) adjusted gross revenue (AGR) calculations.

It was in October 2019 that the court insisted that AGR could be defined in a way that included income from non-core sources. However, what amounts the redefined fees would imply was not made clear – a little unfortunate when the ruling also ordered providers to pay their dues within 90 days.

Both the DoT and the three telecoms companies quickly did their own calculations and, not surprisingly, their final figures were very different.

According to TeleGeography's CommsUpdate, the demands finally issued by the DoT were roughly double the self-assessed figures, and – at least according to the telcos – full of errors that had massively inflated the final figures.

On the upside, at a hearing in September 2020 the Supreme Court ruled that the telecoms companies would be permitted to pay their AGR dues over a ten-year period. However, at that time the allegedly incorrect DoT calculations were taken by the court as final, something that appears to have guided the latest decision.

There also remains confusion over the payment schedule. The September 2020 ruling allowed providers to pay 10 percent of their dues up front and the remainder in annual instalments to 31 March 2031 – but it is still not clear whether payments already made count as dues upfront, giving providers until March 2022 for the next payment as opposed to March 2021.

The ongoing legacy of the AGR debate has certainly been a lot of confusion – but it could soon be much worse than that. Vodafone Idea in particular has an astronomical total AGR debt (calculated by the DoT) of around $7.8 billion at present exchange rates.

Even given the fact that a small amount of this has already been paid, it is hard to see where Vodafone Idea will find the money if this figure is not recalculated which, for the moment, seems unlikely.

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