SC rejects telcos' pleas on AGR dues; Vi shares plunge 20%

The Supreme Court has rejected curative petitions from Bharti Airtel, Vodafone Idea, and other telecom operators seeking a re-computation of their AGR dues. The petitions were listed before a bench comprising Chief Justice DY Chandrachud and Justices Sanjiv Khanna and BR Gavai.

In their latest appeal, the telecom companies challenged the 2019 verdict, which mandated payment of AGR dues worth ₹92,000 crore to the government, alleging grave errors in the Department of Telecommunications (DoT) calculations and arguing the imposed penalties were arbitrary. However, the Supreme Court upheld its earlier decision, reaffirming that no revaluation of AGR dues would be allowed.

Following the Supreme Court’s dismissal, Vodafone-Idea shares plummeted nearly 20% to a 52-week low of ₹10.36 from ₹12.90 and are currently trading at ₹10.93. MTNL shares also fell by 5% to ₹52.41 but have since recovered slightly to ₹53.14. In contrast, Bharti Airtel’s shares remained unaffected by the news and have risen marginally by 1% to ₹1,672.15.

No relief from SC to worsen Vi’s financial situation

The top court’s final decision has dealt a severe blow to Vodafone Idea, exacerbating its already precarious financial situation. This decision could further strain the company’s cash flow, jeopardising its capital expenditure plans. The company's AGR dues have increased from ₹58,000 crore to nearly ₹70,000 crore due to interest charges.

Chronicling the AGR dues case

Adjusted gross revenue, or AGR, is the revenue-sharing mechanism between the government and the telecom operators. Under this, the operators pay a certain licensing fee and spectrum usage fee to the DoT, which is a percentage of the telco’s gross revenue or ApGR (Applicable Gross Revenue). However, disputes over the definition of AGR have been ongoing since 2005.

Telecom operators argued that AGR should only include core telecom revenue, while the DoT insisted it should cover all revenue, including non-telecom services. This disagreement led to legal battles across various judicial forums.

In October 2019, the Supreme Court delivered a landmark judgement, ruling that AGR must include non-core revenue, ending a 14-year dispute. This ruling increased the financial liabilities of telecom operators including Bharti Airtel and Vodafone Idea to over ₹90,000 crore.

Following the 2019 ruling, telecom operators sought more time to pay the massive dues. In September 2020, the Supreme Court granted them a 10-year payment period till 2031, with 10% of the total dues to be paid by March 31 every year.

In 2021, telecom operators like Airtel and Vodafone Idea sought permission from the Supreme Court to correct alleged arithmetic errors in the Department of Telecommunications' AGR calculations. Still, their pleas were dismissed, emphasising that no revaluation of AGR dues would be permitted.

Meanwhile, telco operators including Bharti Airtel and Vodafone Idea opted to defer payment of additional AGR dues.

In 2023, the companies filed their curative petitions, arguing that penalties and interest were excessive. And finally in July this year, Vodafone Idea urgently requested the court to address its curative petition, citing severe financial distress and arguing that the prohibition on correcting errors and the imposition of additional penalties was unjust.

The total AGR dues are currently reported to stand at over ₹1.47 lakh crore, with Airtel responsible for ₹43,980 crore and Vodafone Idea for ₹58,254 crore. However, both companies argue that their actual dues are lower based on their assessments. Of these total dues, approximately 75% are attributed to interest, penalties, and interest on penalties.