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ET Special Podcast (ET Online)
Trouble in Telecom Land
03:23 Min | October 25, 2019, 5:50 PM IST
After the Supreme Court judgement on Thursday, the country's major telecom operators may end up paying dues to the tune of 92,000 crore rupees; listen in as ET explains what landed them in this soup.
TranscriptThe blows keep on coming for the telecom industry
There seems to be no relief for operators.
The Supreme Court just asked telecoms to pay 92000 crore rupees to the government
Obviously, not without reason. Hello and welcome to ET’s Special Podcast
Today, we’re talking about trouble in telecom land
The year is 2005. And the Cellular Operators Association of India (COAI) has challenged the government’s definition for AGR calculation.
AGR - or Adjusted Gross Revenue - is the usage and licensing fee the Telecom department charges carriers
At its core, it has spectrum usage charges and licensing fees.
Now these charges are calculated based on the company's overall revenue.
Which also includes revenue they may earn from deposit interests and asset sales.
Well, look at it like this - you own an IPL team
Shh, imagine you do, and you earn your money from ticket sales
And you pay a certain amount to the entity that owns the stadium
But now the person who owns the stadium wants a percentage of all the money you make - from selling jerseys and merchandise and food at the game
That’s what AGR is.
And, of course, telcos are not happy with that definition
They think AGR should only include revenue earned through telecom services.
Then, in 2015, the definition of AGR was changed to include all revenue except capital receipts and revenue from non core sources
Non core sources being?
You know, things like rent, profit on sales of assets, interest, other income, what have you
And, without fail, the telecoms found a way to go around this
Quite simply - by underreporting their income.
At one point, the Comptroller and Auditor General of India called out telcos for understating revenues to the tune of Rs 60,000 crores.
And the AGR battle wasn’t being fought on one front; there were multiple cases in courts
Until the Supreme Court stepped in.
And they ruled that AGR should include all revenues accrued to the carriers.
But if they do that, the telecom sector is going to have to start looking for money
Which is no fun, because the sector is already in a debt of more than 7 lakh crore rupees
And they get their loans from banks
And if they want more they’ll have to repay - which they can’t in this situation
Which means banks will have to classify their loans as NPAs
And that’ll sink the bank
Blow after blow in the slowdown
Plus, when this case began - there were 15 companies in the country
Now there are just 3
The others have either exited the industry
Or are undergoing bankruptcy proceedings.
Which puts the telecom companies on the spot
Plus, considering that Vodafone Idea just merged
They won’t make it through
Airtel will struggle - but they can pay off their debts
And Jio is backed by the richest man in Asia; no issues there
Which means only Jio and Airtel would stand.
And that’s what affects the authorities. How you do recover so much money without putting the sector under further duress?
And we’ll leave you with that
For more in depth analysis on the economy log on to the ET.com.
Script: Poorabi Gaekwad, Rahul Aripaka
Hosts: Poorabi Gaekwad, Sakshi Prashar
Producer: Poorabi Gaekwad