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Supreme Court’s hard stance may derail the telecom industry once again

The Supreme Court has directed the Department of Telecommunications (DoT) to consider payment proposals by telecom companies who must furnish their books of accounts and balance sheets of last 10 years to show their financial capacity. The next hearing has been fixed for July.

A three judge Bench of Justices Arun Mishra, Abdul Nazeer, and MR Shah was hearing a plea of DoT seeking NV staggered payment of AGR dues by telecom companies. The DoT had moved an application before the apex court seeking permission that the telcos be allowed to pay their AGR dues of Rs 1.43 lakh crore, in a staggered manner over the time period of 20 years.

The apex court in April had already rejected pleas of the three telcos including Vodafone Idea, Bharti Airtel and Tata Teleservices seeking review of the October 2019 verdict of the Supreme Court that had widened the definition of AGR and directed the telcos to pay their dues.

Senior Advocate Mukul Rohatgi appearing on behalf of Vodafone, submitted that the company’s position is extremely precarious, with its losses over several quarters and it is not in a position to give any fresh bank guarantee. It has already paid Rs 7000 crore to the DoT. Over Rs 10,000 crore of bank guarantees are lying with the DoT, which should be considered as security. According to Rohatgi, payment of all the AGR can only be made through instalments over 20 years since the company can only earn and pay.

The bench responded to Rohatgi’s submission stating that Vodafone was a larger foreign player, and some amount must be deposited, especially when during the pandemic the government needs this money.

Vodafone has often stated that it lacks the resources to service over Rs 53,000 crore in AGR demand and the promoters are unwilling to invest more. The apex court has asked for details of the operator’s assets.

In its affidavit to Supreme Court, Airtel said that Bharti Group Companies have paid substantial sums in compliance with the Judgment and it is fully willing to pay whatever amounts are required to be paid in accordance with the Judgment. It said, “While the EBITDA of the Bharti Companies is more than adequate to meet the dues, the Bharti Companies are humbly requesting this Hon’ble Court to grant a time period of 20 years. This will enable the Bharti Companies to ensure that they also continue to make capital expenditures to support the vision of digital India and allow the customers to have a choice of competing players to deliver services,” Airtel said in its affidavit to the Supreme Court.

Senior Advocate Dr AM Singhvi, appearing for Bharti Airtel informed that Rs 18,000 crore out of Rs 21,000 crore have been paid. Bank guarantees of Rs 10,800 crore, consisting of Rs 4000 crores toward dues under the license, including amount of Rs. 2800 crore equivalent to two quarters of estimated license fees; and Rs. 6800 crore toward spectrum deferred liability is pending with DoT.

“These bank guarantees are available and lying with the DoT and can be used a security for amounts due, if any, and invoked in accordance with the license conditions by the DoT. It is also submitted that the licenses granted to the Bharti Companies also contain terms and conditions that provide the DoT the right to cancel the licenses in the event of any breach by the Bharti Companies in terms thereof. It is further submitted that spectrum is a valuable resource as recognized by this Hon’ble Court in numerous judgments,” Airtel said.

If Bharti Airtel is pushed, while it may be able to raise the cash, and make the payments,  it will impact its ability to invest in further network rollouts, as well as its participation in the 5G spectrum auctions.

Senior Advocate Arvind Datar on behalf of Tata Teleservices, informed the Court that Rs 37,000 crore have been paid, and the company has been hit by the pandemic.

During the hearing, Solicitor General, Tushar Mehta, on behalf of DoT stated that an affidavit has been filed explaining why AGR dues were raised against non-telecom PSUs based on the Supreme Court’s October 2019 verdict and DoT has decided to withdraw 96 percent of the Rs 4 lakh crore demand raised.

The Supreme Court in its hearing last Thursday had directed DoT to reconsider the claims raised on PSUs based on SC’s October 19 verdict regarding the telecom companies and their AGR dues, stating that the Court’s judgement could not be the basis for demands on PSUs.

According to the Court, raising demand on PSUs based on verdict for AGR wasn’t required since licenses of PSUs and telcos are of different nature, and PSUs do not intend commercial exploitation.

-CT Bureau

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