Staggered AGR payment hits Centre’s telecom revenue in FY21

The government has sharply lowered its estimate for revenue collection from the telecom sector in the Union Budget. It has revised the estimate to ₹33,737 crore from ₹1.33 trillion pegged for the current financial year ending March. This is mainly because telecom operators were allowed to make staggered payment of their adjusted gross revenue (AGR) liability, which the Centre had accounted for in revenue receipts for the year.

The Supreme Court in September allowed telcos 10 years to pay their AGR dues, including penalty, interest, and interest on penalty. It ordered 10% upfront payment of the total dues, while the rest is to be paid in ten annual instalments starting from 1 April, 2021.

“Telecom receipts estimates for FY21 are sharply revised down from ₹1.33 trillion to ₹34,000 crore (approx.) largely due to staggering of ₹1.1 trillion AGR repayment,” said a telecom analyst, requesting anonymity.

Moreover, a two-year moratorium on deferred spectrum dues, or instalment payments made by telcos for airwaves bought in the past auctions, impacted the government’s revenues during the year, analysts said.

“The government has lowered its expectations of communication receipts in FY21 by a sharp 75% from $18 billion to $4.6 billion… This is largely because of the two-year moratorium given on deferred spectrum payments to telcos which are in effect over FY21-22 and negligible AGR collections in FY21,” investment bank Jefferies said in a report.

These estimates have been categorised as receipts from other communication services.

According to the Union Budget, receipts under other communication services relate to license fee and proceeds from spectrum usage charge (SUC).

The department of telecommunications (DoT) collects recurring fee from telcos licensed by it. Licence fee is levied at 8% of the AGR after various adjustments and levy of taxes, while SUC is imposed for usage of spectrum and calculated as a percentage of AGR depending on the quantum assigned to telcos for their network.

For FY22, the Budget has pegged revenue receipts from the telecom sector at ₹53,987 crore, higher than the revised estimate for FY21, as it expects collection from a likely spectrum auction for 5G wireless service, analysts said.

“The government has budgeted receipts of ₹540 billion in FY22 (versus ₹337 billion in FY21) from the telecom sector. We believe this could include receipts from potential spectrum auction on the 5G bands (3.3GHz to 3.6GHz), given that most upfront payment for spectrum auctions in FY21 would be collected in March 2021,” said Morgan Stanley.

Some analysts believe that the estimate for FY22 could mean that the government will receive the amount for the upcoming spectrum auction in March only in the next fiscal.

“In FY22, telecom receipt target is up by 60% to ₹540 billion, potentially due to the upcoming spectrum auction in March 2021. Of which, we estimate ₹197 billion from annual license fee and SUC, while the rest could ₹226 billion could be from spectrum auction,” said the first analyst quoted above. Livemint