Bharti Airtel and Vodafone Idea move SC, seek review of certain directions on AGR
The telcos have sought a limited review of the October 24 ruling, and haven’t challenged the entire SC order.
The telcos have sought a limited review of the October 24 ruling, and haven’t challenged the entire SC order that widened the definition of AGR and left them facing Rs 1.47 lakh crore in additional licence fee, spectrum usage charge (SUC), penalties and interest. They have also not sought any extension of the three-month payment deadline.
Licence fee and SUC are calculated on the basis of AGR. Vodafone Idea and Bharti Airtel are desperate to have penalties and interest waived off, failing which their survival could be in question. These comprise 75% of their combined Rs 89,000-crore AGR dues.
“Airtel has filed for a review of interest, penalty and interest on penalty,” a person familiar with the matter told ET. Besides a review of the penalty, Vodafone Idea’s petition has also urged the Supreme Court to have a “relook at the amounts attributed to notional revenue”, said another person.
Some examples of notional revenue in case of mobile phone operators are discounts on plans and forex gains. For instance, if a telco has a plan offering 100 minutes of talk time for Rs 100, but offers a Rs 20 discount, then according to the telecom department the carrier must pay licence fee on Rs 100 — the original rate card. The operators, however, had argued that they would pay on Rs 80.
The operators are challenging the imposition of penalty on the grounds that the government never raised final demands. What was raised were provisional demands that were legally disputed by the operators. Bharti Airtel declined to comment, while Vodafone Idea and Tata Teleservices did not reply to ET’s queries.
Shares of Vodafone Idea and Bharti Airtel ended 1.2% lower at Rs 6.56 and Rs 421, respectively, on the BSE Friday. Vodafone Idea and Bharti Airtel are the worst hit, facing statutory dues of Rs 53,039 crore and Rs 35,586 crore, respectively, which they need to pay up in just over two months from now.
Tata Teleservices, which has sold its consumer mobility business to Airtel, faces dues of Rs 13,823 crore. “The Supreme Court has examined in details each and every point of AGR… At most, it can relook at the penalty and interest charged,” said Saurav Kumar, partner at law firm IndusLaw.
The reviews were filed after the government made it clear that it was up to the mobile phone companies to move court to seek a review of the order to get relief, or if they want more time to pay up the dues, officials told ET. Lawyers said less than 2% of the review petitions for Supreme Court orders are successful.
Vodafone Idea MD Ravinder Takkar has previously said that, if required, the telco has the option of filing “a curative petition before a five-judge Supreme Court bench, which can be different” from the one that delivered the October 24 ruling.
Industry officials said if the telcos fail to get any relief from the apex court, the government may be forced to intervene to ensure Vodafone Idea and Airtel survive. The government has said it will ensure the telecom market, where Reliance Jio is the only other private operator, and the only one making profits, isn’t reduced to a monopoly.
Just over a week ago, Vodafone Idea and Bharti Airtel had raised doubts over their ability to continue as going concerns if they had to pay the full AGR dues. The telcos posted combined losses of nearly Rs 74,000 crore for the July-September quarter after provisioning for AGR-related dues. Vodafone Idea — whose Rs 50,921.9-crore quarterly loss was the worst in India’s corporate history — had set aside Rs 25,680 crore. Bharti Airtel — which posted the third-worst quarterly loss ever for India Inc at .`23,045 crore — provided for .`28,450 crore. The telecom department has already sent notices to mobile phone companies to self-assess dues basis the SC order and make payments. If there is any difference in the calculations made by the department and that of the telcos, the DoT will send demand notices for the balance amounts. The legal route is part of a two-pronged strategy of the telcos, the other being to push the government to provide some financial relief. The Centre had set up a panel of secretaries, headed by cabinet secretary Rajiv Gauba, to suggest ways to help restore the sector’s health. The panel suggested a moratorium on spectrum payments, which was cleared by the Cabinet on Wednesday. The government, however, didn’t reduce the 8% of AGR that telcos pay as licence fees, as was widely expected.