Telecom Companies Gets Big Shock from Supreme Court on Payment due to Government, Vodafone Idea Will be in Trouble

There have been major changes in the country’s telecom sector in the last few years. Big telecom companies have overcome financial difficulties and achieved growth. However, a decision of the Supreme Court on Thursday has dealt a major blow to this sector. The Supreme Court has rejected the request of telecom companies to recalculate the amount due to the Central Government.

Analysts at rating agency ICRA estimate that Bharti Airtel and Vodafone Idea have to pay around Rs 1 lakh crore to the government as adjusted gross revenue (AGR) outstanding amount. This includes spectrum charges and licensing fees. However, the outstanding amount of other telecom companies is not known.

As a last resort, these companies had filed a petition against a similar decision of the Supreme Court three years ago. Their argument was that the Telecom Department AGR Mistakes were made in the calculation of the alleged outstanding amount of Rs. These companies say that only the revenue from their core services should be counted in the calculation of the outstanding amount, whereas the government’s argument was that non-core revenue should also be included in AGR. This also includes the amount received from rent or sale of land. In a 2019 decision, the Supreme Court had upheld the government’s definition of AGR calculation.

Balaji Subramanian, Research Analyst, IIFL Securities, said, “A decision in favor of the telecom companies in this case could have reduced Vodafone Idea’s debt by about Rs 35 billion. This will make debt funding difficult for Vodafone Idea as cash flow will be less. Because of this, banks will be reluctant to fund it.” The Supreme Court’s rejection of its request for recalculation of AGR has dealt a major blow to Vodafone Idea, which has to pay about Rs 700 billion to the government in the form of spectrum charges and license fees. The central government is also the largest shareholder in Vodafone Idea with 23.1 percent stake. Analysts believe that due to the strong financial condition of Bharti Airtel, this decision will not have a major impact on it. Bharti Airtel and Vodafone Idea did not respond to requests for comment.

(This news has not been edited by NDTV team. It is published directly from the syndicate feed.)