The document summarizes the telecom industry crisis in India resulting from a Supreme Court ruling on Adjusted Gross Revenue (AGR) dues. The ruling requires telecom companies to pay over 1 lakh crore in back dues. This could bankrupt Vodafone Idea and lead to job losses. It threatens the stability of the telecom sector and digital economy. Allowing only two companies could hurt consumers and investments. Urgent relief is needed to save Vodafone Idea from shutdown and ensure fair competition in the industry.

1. TELECOM INDUSTRY CRISIS
Dr. Geeta

2. Significance of the Telecom Sector
• Telecom sector forms a key part of the infrastructure of
any economy as it provides Information and
Communication Technology.
• Services sector forms the lion's share of India's
economy, the whole services sector heavily relies on
ICT.
• It plays the role of key enabler in several welfare
schemes related to health, education, agriculture,
transport, energy and financial inclusion.
• Apart from it, the Telecom sector provides these
services in a cost-effective and environment-friendly
way.

3. • On October 24 2019, the Supreme Court of India upheld
the Department of Telecom (DoT)'s interpretation of
Adjusted Gross revenue (AGR). This meant a huge blow to
telecom service providers, as the telcos had to pay an
estimated ₹1.4 lakh crore to the government.
• The Supreme Court, on 17 February 2020, ordered these
companies to immediately pay up the revenue share of the
government failing which the bank-guarantees that were
taken by the DoT while allotting licence to these companies
will be invoked.
• The same will lead to these companies, especially Vodafone
going bankrupt and pulling out of India, leaving 30,000
Vodafone subscribers in the lurch and about 13,000
employees going jobless.

4. Behind the Crisis
• The Tussle started when telecom operators migrated to a new system
offered by government in 1999. This new system came to be known as
Revenue Sharing Model.
• To decrease the heavy charges of License fee and Spectrum Usage, GOI
linked these charges to AGR(Adjusted Gross revenue)
• Now, Telecoms were required to pay annually 3-5% of AGR as License fee
& 8% as Spectrum Usage charges.
• But the definition of AGR was different as per DoT (Ordered to include
both non core and core service revenue) & as per the telecoms (Bargained
for including only core service revenue)
• Then in 2005, telecom COAI ( Cellular Operators Association of India)
approached Court and later In 2015 goes to TDSAT (Telecom Dispute
Settlement Appellate Tribunal) and decision was in favour of Telecoms
• Then DoT approached supreme court and final verdict came in October
2019 in the favour of DoT.

5. Behind the Crisis Contd..
• Telecoms were required to pay not just the shortfall n AGR for past 10-14
years, but also an interest on that amount along with the penalty &
interest on penalty.
• Centre Decided to give some relief package for telecom Industry, which
was later not accepted by SC.
a) Telecom Operators allowed to pay a reduced annual interest rate @8%
(earlier 16%)
b) Telecoms allowed to self assess their dues and pay their license fee and
SUC dues over an extended 20 year period.
• The supreme court on 14th Feb 2020 pulled up mobile service operators
and DoT for failing to comply with its earlier verdicts, which mandated
telecoms to pay AGR dues over ₹ 1 trillion to DoT by 23rd Jan 2020.
• Then on 23rd Jan 2020, Dot issued and order if any company does not pay
the dues, no action will be taken.

6. • Between this period ( Oct 19 – Jan 2020) Telecom approached SC for
some relief and hearing takes place on 14th Feb 2020.
• SC rapped DOT and telecom for not obeying its order.
• The Supreme Court had asked companies to clear dues, totalling an
estimated Rs 1.47 lakh crore, before the next date of hearing on March 17
2020.
• DoT issued circle wise demand notices to telecom firms. An order for the
UP (West) Telecom Circle asked "all telecom service providers" to clear
dues by 11.59 pm Friday.
• SC heard the plea of GOI on 18th March 2020. Although the court told the
government that it will consider giving relief to telecoms in the next
hearing (which was fixed for two weeks from March 18), telecoms have to
pay the dues as per the DoT's calculations - either lump sum or in annual
instalments over 20 years.
Behind the Crisis Contd..

7. Reason for Loss
1. Adverse verdict by Supreme Court regarding
Aggregate Gross Revenue.
2. Arrears of Revenue
This sudden pressure could have been
controlled, if there could have been provisions in
balance sheet (contingent liability)

8. What is AGR issue?
• The telecom sector was liberalised under the National Telecom Policy,
1994 after which licenses were issued to companies in return for a fixed
license fee.
• To provide relief from the steep fixed license fee, the government in 1999
gave an option to the licensees to migrate to the revenue sharing fee
model.
– Under this, mobile telephone operators were required to share a percentage
of their AGR with the government as annual license fee (LF) and spectrum
usage charges (SUC).
– License agreements between the Department of Telecommunications (DoT)
and the telecom companies define the gross revenues of the latter.
• The definition of AGR has been under litigation for 14 years. In 2005,
Cellular Operators Association of India (COAI) challenged the
government’s definition for AGR calculation.
• However, DoT argued that AGR includes all revenues from both telecom
and non-telecom services.

9. Contd..
• The companies claimed that AGR should comprise just the revenue
accrued from core services and not dividend, interest income or
profit on the sale of any investment or fixed assets.
• In 2015, the TDSAT (Telecom Disputes Settlement and Appellate
Tribunal) stayed the case in favour of telecom companies and held
that AGR includes all receipts except capital receipts and revenue
from non-core sources such as rent, profit on the sale of fixed
assets, dividend, interest and miscellaneous income.
• However, setting aside TDSAT’s order, Supreme Court on October
24, 2019, upheld the definition of AGR as stipulated by the DoT.
• Given the slowdown in the Indian economy and this huge financial
liability under AGR rules, many telcos are on the verge of collapse.
This may have far-reaching ramifications for various stakeholders.

10. Non telecom PSUs
AGR demand from non telecom is ₹ 3 Lakh Crore.
Nearly All of these are PSU like. ( Uses Spectrum for
Intercommunication and further also lends to
telecoms)
• GAIL
• Power Grid Corporation of India
• Rail Tel
• Oil India
• Delhi Metro Rail Corporation
AGR demand is between two & three times their
average revenue.

11. As per the data before 17th March 2020
Company Name Due Estimates by
DoT
Self
Assessed
Dues
Paid
Bharti Airtel 43,980 Crore 13,004 Crore 1,8004 Crore Paid
Vodafone/Idea 58,254 Crore 21,533 Crore 6,854 +3354Crore Paid
Tata Group 16,798 Crore 2,197 Crore 4,197 Crore Paid
Reliance Jio 195 Crores
For all 16 Entity
(On Oct 2019)
1.47Lakh Crore 37,176
Crores
SC Ordered - To be paid before 23rd January 2020 and later by 17th March 2020.
Company Name License Expire on No. of
licenses
Airtel 2021 08
Tata tele Services 2021 04 (Sold consumer mobility
business to airtel)
Vodafone /Idea 2033 22

12. As on 17th March 2020
• According to latest figures submitted by DoT,
Vodafone Idea owes Rs 54,754 crore, Bharti
Airtel Rs 25,976 crore, Reliance
Communication Rs 25,194 crore and Tata
Group Rs 12,601 crore.

13. Implications of Telecom Sector Crisis
• Vodafone Idea and BSNL-MTNL are hurtling towards an
eventual shutdown, which might as well be an abrupt
collapse if they are forced to pay up the due as per the
Supreme Court order.
• Government has recently encouraged nearly 92,700
employees of BSNL and MTNL to opt for voluntary
retirement to save about Rs 8,800 crore annually in salary
bills for the debt-laden telecom companies.
• Similarly, Vodafone Idea, which is the country's second
largest telco in terms of subscribers, is already sitting on
the edge of bankruptcy. If it pulls out of India and also BSNL
collapses, the fate of nearly 40,000 subscribers will be
jeopardized in terms of continuous availability of telecom
services and also for competitiveness in the industry itself.

14. Contd..
• The telecom industry serves as the backbone for digital economy,
which runs on the mobile services infrastructure. Any disruption in
the telecom services will have serious repercussions for the digital
economy and may lead to curb in foreign investments in India.
• It may be understood that the Indian telecom business (both voice
and data) is headed towards becoming a duopoly (Reliance Jio and
Bharti Airtel). The same is likely to spell disaster for the telecom
industry as these companies can hold the subscribers to ransom
and charge them at will.
• Lastly, besides the likely disruption in provision of continuous
telecom services in India, the crisis is bound to increase the tariff
rates for the subscribers and will result in massive job losses when
the telecom industry has a shutdown of its major players.

15. Subhash Chandra Garg said the telecom crisis today is much
bigger than it was in 1998
• The former bureaucrat, who worked closely with former
finance minister Arun Jaitley, said that Indian telecom
business (both voice and data) is headed towards becoming a
duopoly (Reliance Jio and Bharti Airtel) with the remaining
two players - Vodafone Idea and BSNL-MTNL - hurtling
towards eventual shutdown, which might as well be an abrupt
collapse.
• The Supreme Court's recent order on the AGR, asking the
telecom major to pay Rs 53,039 crore to Department of
Telecommunications (DoT), has put it in a tight spot.
Currently, Vodafone Idea owes Rs 88,530 crore to the
department of telecom (DoT) for the spectrum that it has
bought in the previous auctions. This is in addition to the AGR
liability of Rs 53,039 crore.

16. • "Vodafone-Idea lost whopping 3.64 crore subscribers in the
single month of November 2019. It has lost over 6 crore
subscribers in first nine months of 2019. It would be no surprise
if Vodafone loses a total of 10 crore subscribers in the year 2019-
20. Very clearly, it is not going to survive unless something is
done," he added.
• "The duopoly of Jio-Airtel would not be in the interest of
country. India needs a healthy and competitive telecom sector. It
would be in national interest if Vodafone survives as a strong
player. There are two options to ensure this," Garg said.
• It is notable that all the companies, other than the three- Jio,
Airtel and Vodafone Idea- have either shut shop or are in
insolvency process or are fighting cases against the Government
in Courts or international Tribunals. Erstwhile telecom majors
like Anil Ambani's Reliance Communications and Aircel are in
insolvency process.