The Supreme Court has dealt a significant blow to Vodafone Idea and other telecom companies by rejecting their curative petitions seeking relief from the 2019 ruling on Adjusted Gross Revenue (AGR). This ruling requires telecom companies to include non-telecom revenue in their AGR calculations, which determines the licence fees and spectrum usage charges payable to the government.
The court’s decision, announced on August 30, has left Vodafone Idea facing an immense financial burden of ₹1.47 trillion in AGR dues. This outcome could significantly impact Vodafone Idea’s ability to recover from its existing financial struggles, as it has been battling to reduce its debt and improve its services. While Airtel also faced similar dues, its financial strength is expected to cushion the blow.
The curative petitions, filed by Vodafone Idea, Airtel, and other telcos, aimed to rectify alleged clerical and arithmetic errors in the AGR calculations. They also sought a reduction in the penalty to 50% of the pending dues instead of the full amount, and a lower interest rate on the penalty. The companies argued that the telecom department had imposed arbitrary penalty amounts.
The court’s refusal to reconsider the AGR calculation method has put a significant strain on Vodafone Idea’s financial standing, particularly as it is already struggling to meet its existing obligations. The company had recently raised ₹18,000 crore through a public offer and is in talks with banks to secure an additional ₹35,000 crore in debt and bank guarantees. This financial turmoil comes at a time when Vodafone Idea is implementing a five-year ₹55,000 crore capex plan to improve its services and regain competitiveness.
The court’s decision also has negative implications for Indus Towers, a major tower company that counts Vodafone Idea as one of its largest tenants. Vodafone Idea owes Indus Towers an estimated ₹7,000- ₹10,000 crore.
The 2019 Supreme Court order, which the curative petitions sought to overturn, had already caused significant damage to the balance sheets and profitability of telecom companies. The government was poised to receive ₹92,461 crore in licence fees and ₹55,000 crore in spectrum usage charges from the telcos, based on the AGR calculation method.
While the court allowed telecom companies to pay their AGR dues over a 10-year period in response to a plea in 2020, the latest decision effectively eliminates any hope for a significant reduction in these dues. Vodafone Idea’s financial struggles are likely to intensify as it grapples with the heavy burden of its AGR obligations.
