Singtel associate Bharti Airtel must pay $4b in dues after court ruling

Ruben Fields
January 17, 2020

An appeal by Vodafone and Bharti Airtel, which was told to pay US$3 billion, was rejected on Thursday, with the supreme court also refusing to allow the payments to be staggered.

The top court by its October 24, 2019 verdict had directed the cash-strapped TSPs to pay up Rs 90,000 crore-around 3 per cent of AGR as spectrum charges and 8 per cent as licence fees. Operators argued that AGR should comprise only revenue from telecom services, but the DoT insisted that it should include all revenue earned by an operator. Having perused the review petition and the connected papers with meticulous care, we do not find any justifiable reason to entertain the review petitions.

The companies will have to pay the pending dues by January 23.

Shares in Vodafone's Indian unit plunged nearly 40% on Friday after officials rejected its appeal against paying US$4 billion in back fees, raising questions about the British giant's future in the country.

The government had raised a total demand of around 920 billion rupees ($13 billion) against all telecom operators, including defunct ones, according to filings in the court. "The industry continues to face severe financial stress and the outcome could further erode the viability of the sector as a whole", the spokesperson said.

In its statement after the judgment, Bharti Airtel said they were evaluating filing a curative petition.

Kumar Mangalam Birla, Chairman, Vodafone-Idea, had also recently said that Vodafone may have to shut shop if the government does not agree to provide relief in the AGR case. The company is feared to be heading to insolvency amid its mounting debt.

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Vodafone Idea had posted a net loss of Rs 50,921 crore for that quarter, the largest quarterly loss in India's corporate history.

Vodafone Group, the British carrier that owns 45% of the venture, wrote off the carrying value of its shares in Vodafone Idea in its earnings for the half-year through September after analysts flagged the possibility of further impairments.

The recovery of past dues by the government was based on AGR of around ₹92,000 crore.

Vodafone Idea with over 16.82 crore shares changing hands was leading among the most traded stocks on NSE on Friday. The court had said the companies had not only to pay licence fee but will have to shell out interest and penalty for delaying payment.

Vodafone Idea is also in the process of selling its data centres and optic-fibre assets, besides its 11% stake in Indus Towers, to help pare the debt.

The ruling comes as the industry is barely recovering from a prolonged period of price competition triggered by the entry of billionaire Mukesh Ambani's Reliance Jio Infocomm more than three years ago. "Once the gross revenue is defined, one can not depart from it and the very meaning is to be given to the revenue for the agreement", the bench said, adjudicating the dispute between the Centre and telecom companies that has been going on since 2003.

Airtel said the industry needs to continue investing in expanding networks, acquiring spectrum and introducing new technology such as 5G. "The money required to pay - punitive interest, penalty and interest on penalty - which forms almost 75 per cent of AGR dues, would have better served India's digital mission", Airtel said.

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