Keep handset, OTT revenues out of AGR

The telecom industry has sought further refinement in the definition of adjusted gross revenue (AGR) so as to exclude certain categories of revenue stream which they feel do not emanate from their licensed telecom service. Income from sale of handsets, OTT subscription, capital receipts, mobile advertising services etc, figure on this list.

The industry has also written to the Department of Telecommunications (DoT), urging that revenue generated from services which do not require spectrum such as wireline service, leased circuits, bandwidth charges, port charges, and infrastructure sharing charges, be not taken into account while calculating the AGR for paying spectrum usage charge (SUC).

As part of the revival package it announced on September 15, the government has redefined AGR to keep out revenue streams of the operators other than telecom services. As a result, a new definition termed applicable gross revenue (ApGR) has come. Operators pay licence fee at 8% of their AGR and spectrum usage charge ranging between 3-5% of their AGR.

Interest income earned from refundable security deposits from customers like advance rentals, continues to be part of ApGR and the industry has objected to its inclusion. In a letter to the DoT through its industry body, Cellular Operators Association of India (COAI), the telecom operators have highlighted that it is not practically possible to segregate the interest earned from such activities. Further, any notional evaluation of interest on such deposits may lead to another round of disputes in future.

“The list of other income which have been allowed to be reduced from gross revenue to arrive at ApGR is not comprehensive in nature and many items of other income have been excluded which are in no manner linked to provision of telecom services. These items ought to be excluded in clear terms so as to conform to the decision of the Union Cabinet,” the COAI wrote.

The operators feel that since DoT has not defined telecom activities, it is quite possible that many revenue streams which may appear to be ancillary or incidental to telecoms services will also be included in AGR.

The operators have also sought a change in the format of AGR, which currently has been designed circle/licence wise. “This would require the whole of non-telecom revenues viz interest, dividend etc to be first allocated to these circle/licences against the gross revenue and then exclusion of these items. This means a double working to arrive at the ApGR. Instead, if a single gross revenue and ApGR should be prepared for the company and then that ApGR should be shown with the circle/licences,” COAI has said.

Further, the industry has urged that all the charges which are pass-through in nature, that is, paid to other telecommunication service providers should be allowed as a deduction for all services. FinancialExpress