Any immediate payout by telecom companies following Supreme Court judgement on adjusted gross revenue (AGR) would leave them with limited financial flexibility ahead of the 5G spectrum auction, according to Fitch Ratings. This would delay the auction process, the ratings agency said.
Earlier this week, the Supreme Court upheld Department of Telecommunications' (DoT) definition of AGR, ending a 14-year-long legal battle between the Centre and the telecom companies. The telecom service providers are now looking at a payout of over Rs 92,000 crore to the government. The apex court has made it clear that there would be no further litigation on the issue.
"The quantum and timing of cash outflow is uncertain as over 60 per cent of outstanding dues include taxes and penalties. 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," IANS quoted Nitin Soni, Director - Corporates, Fitch Ratings, as saying.
India is likely to get 5G network next year. At the India Mobile Congress earlier this month, telecom minister Ravi Shankar Prasad had stated that spectrum auction would be conducted within the current financial year and the government was undertaking some reforms in the spectrum pricing as well.
However, with the Supreme Court ruling on AGR, incumbent Indian telecom companies are looking at huge payouts. As per an affidavit submitted before the apex court by DoT in July, Bharti Airtel has pending licence fee dues of nearly Rs 21,700 crore. Meanwhile, the document puts dues of the combined entity of Vodafone Idea at almost Rs 28,300 crore. Anil Ambani-led Reliance Communications, which is undergoing insolvency proceedings, has pending licence dues of nearly Rs 16,500 crore, the affidavit shows.
AGR is calculated on the basis of spectrum usage charges and licence fees payable by telecom companies. The telecom companies are liable to pay around 3-5 per cent of AGR as spectrum usage charges and 8 per cent of the AGR and licence fees.
(With agencies' input)