In a big setback for incumbent telcos, the Supreme Court has ruled in favour of the government on the adjusted gross revenue (AGR) issue. A bench led by Justice Arun Mishra, A.A. Nazeer and M.R Shah has upheld the definition of AGR calculation as suggested by DoT.
The Apex Court has said that all revenues accruing to telecom operators would constitute AGR. It added that revenues gained from termination fees and roaming charges would also be included in AGR.
Further, as per the order, not only the original charges, but principal interest and penalties on delayed payments would also be payable by telcos. As per industry calculations, telecom companies have to pay as much as Rs 926.42 billion to the government. Of this, more than half (close to Rs 500 billion) are owed by Airtel and Vodafone, while the remaining is owed by other telcos who have already shut shop in the country.
The definition of AGR has been a long standing dispute between the DoT and the telecom operators dating back to 2005. AGR is the usage and licensing fee that the DoT charges from the telecom operators. It is divided into spectrum usage charges and licensing fees, pegged between 3-5 percent and 8 percent respectively.
As per DoT, the charges are calculated based on all revenues earned by a telco – including non-telecom related sources such as deposit interests and asset sales. Telcos, however, are of the view that AGR should comprise only the revenues generated from telecom services.
The issue of inclusion of revenue from non-telecom activities and interpretation of the heads included in the definition of AGR under the license conditions has been through several rounds of litigation till date. Earlier, the Telecom Disputes Settlement Appellate Tribunal (TDSAT) had upheld the DoT’s definition of AGR, but with certain exemptions. In response, the DoT, had filed an appeal before the Supreme Court, citing that the TDSAT had no jurisdiction on the validity of terms and conditions of licenses.