Any immediate payment of dues by telcos following the Supreme Court order on adjusted gross revenue (AGR) would leave them with limited financial flexibility to bid for 5G spectrum thus delaying its auction, Fitch Ratings has said.
The Supreme Court had on Thursday upheld the government's broader definition of revenue on which it calculates levies on telecom operators, dealing a Rs 92,000 crore blow to an industry already reeling from a collapse in tariffs and mounting debt.
AGR is the basis for calculating the spectrum usage charges and license fees paid by telecom companies to the DoT. The higher the AGR of a telco, the higher the payments the companies have to make to the DoT.
The Supreme Court (SC) has said the telecom companies would have to pay the fine and penalties, apart from the AGR dues on licence.
"The Supreme Court's acceptance of the DoT's definition of AGR is a setback to the telecom industry. The quantum and timing of cash outflow is uncertain as over 60 per cent of outstanding dues include taxes and penalties,” Nitin Soni, Director - Corporates, Fitch Ratings told IANS.
The payout by telcos could rise to an estimated Rs 1.23 lakh crore once spectrum usage charges (SUC) linked to the AGR are taken into account.
“If Vodafone Idea were to pay $4 billion immediately, it would cause a severe stress on their balance sheet. Also an immediate payment of such dues could delay the 5G spectrum auction as incumbents would have limited financial flexibilities to bid for 5G spectrum auctions,"
The DoT’s definition of AGR was first challenged in 2005 by the Cellular Operators Association of India. A number of cases were filed across the country, which saw conflicting decisions. The telecom sector is already riddled with heavy debt, triggered by aggressive data plans by Reliance Jio since 2016, forcing others to follow suit.
And all these complexities, as the Fitch Ratings suggest, could derail the prospects of 5G launching in India.
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