While the 2019 order imposed a figure of Rs 92,000 crore in AGR dues payable to the Department of Telecom (DoT), the figure has grown since to breach the Rs 1.5-lakh-crore mark.

Observing that sufficient grounds had not been made to consider the curative petition filed by the telcos, a three-judge bench of Chief Justice DY Chandrachud, Justice Sanjiv Khanna and Justice BR Gavai passed the judgment, driving another deadly nail that could seal the coffin that Indian telecom finds itself in.

Peculiarly, even telecom firms that have shut shop in India face severe financial hiccups after Thursday’s ruling. If those be included, the figure would be Rs 1,56,620 crore (beak-up provided below). Further, if DoT’s submission on payments and penalties (explained below) is accepted by the SC, the figure will climb higher still.

Between just the two of them, ‘active’ petitioners (in the current case) Vi and Bharti Airtel owe over Rs 1 lakh crore in past dues to the DoT, which includes spectrum charges and licensing fees, according to analysts at ICRA. Previous filings show Bharti Airtel and Vodafone Idea (Vi) were required to pay Rs 43,980 crore and Rs 58,254 crore, respectively, in AGR dues. 

Shutters Down, But Dues Still Causing Nightmares

While analysts declined to share the AGR dues of other telcos, sources pegged the figure at three former telcos at over Rs 54,000 crore. As per original filings before the Supreme Court, AGR dues amounted to Rs 25,199 crore for Reliance Telecom, Rs 16,798 crore for Tata Group and Rs 12,389 crore for Aircel.

Of particular alarm for telcos is DoT’s submission to the SC which states that: “1. Total demands are inclusive of Principal, Interest, Penalty, and Interest on Penalty; 2. Total demands have been calculated generally up to FY 2016-17. On these outstanding amounts, Interest, Penalty, and Interest on Penalty are calculated up to October 2019; & 3. All dues are subject to further revisions due to departmental assessments, CAG Audits, Special Audits, Court Cases, etc.”

Simply put, this means that the actual demand by DoT could end up being significantly higher.

That having been said, telcos did get a breather of sorts in the SC’s 2019 order, as they were allowed to pay the outstanding amounts in installments over 10 years, with each installment payable before March 31 of that year. Notably, telecom firms had filed review petitions against the 2019 decision as well, but that was dismissed in January 2020. At that time, telcos had argued that the DoT made errors in calculating the AGR dues.

For instance, telcos argued that even connections that fell under the ‘business expenses’, ‘marketing expenses’ and ‘non-telecom revenues’ categories (viz employees’, partners’, and vendors’ mobile phone connections), had been made part of the AGR calculations by DoT. These should not have been counted as ‘revenues’, telcos claimed.

Shortly after the SC ruling on Thursday, shares of Vodafone Idea recorded their worst single-day showing, ever, since January 2022, losing 20 per cent in intra-day trade before closing at 10.38 on the National Stock Exchange. Indus Tower fared only slightly better, posting its worst one-day loss of 9 per cent since June this year to close at Rs 390.

Interestingly, Bharti Airtel, one of the companies that moved the apex court against the 2019 ruling, not only managed to avoid the share market bloodbath, its shares actually gained 0.6 per cent after the ruling on Thursday to close at Rs 1,665.

Will This Order Cause A Further Tariff Hike?

A lot of negativity has surrounded the recent price hikes announced by Indian telcos, which have seen monthly spending rise by 15-20 per cent.

What most don’t realize, though, is that telcos are staring extinction in the face, given wafer-thin margins and rising costs, especially after the entry of Reliance Jio Infocomm into the telecom mix in 2015. Add in the financial liability that falls onto the telcos’ laps with this latest order; the death knell is just around the corner.

Jio Infocomm took the wind out of telecom sails when it launched services with the promise of ‘forever-free’ voice calls. All that remains today by way of steady telco revenues are data services. But here too, Jio and Airtel have locked horns to corner this one remaining hunting ground, with a hapless Vi watching from the sidelines.

Nine years later, the data battle rages, with the standoff hurting Vi the most. The flipside is curious – if another price hike happens, it will benefit Vi the most, buying it precious time to plan its future in India, whether a resurrection or the final exit from the most cut-throat and cheapest telecom market in the world.

The odds are in favour of a ‘wait-and-watch’, though, for no one has the gumption or financial muscle to withstand a skirmish. Remember, the industry headcount has already gone down from 12 in its heyday to just three today.

Telcos Have Only Themselves To Blame

Even before the arrival of Jio Infocomm, telcos had daggers unsheathed to carve out one another’s throats, making knee-jerk financial moves just to increase customer numbers.

The madness in the sector was visible whenever the Government held spectrum auctions, with bids being so bizarre that many analysts would scratch their heads to try and decipher why. It was almost as if telcos forgot that the bids had to be honoured – and eventually paid.

Having made crazy, but nonetheless significant investments on spectrum, networks, offices and other infrastructure, telcos have struggled to find ways to increase average revenues per user (ARPUs) to meet payment obligations and outflows.

With monthly ARPUs always under Rs 200 and AGR dues piling up, it was just a matter of time before everything hit the fan. Today, operators might insist sagely that ARPUs above Rs 300 are the only way to survive. Today, though, is too late for their ‘wisdom baby’ to have been born.

Two telcos (one functioning and the other shut down) contacted by The Secretariat said it was up to the Government to provide relief to the industry, given telecom’s ‘essential services’ claim and the bouquet of ‘other services’ that run on data access and connectivity, viz online payments, banking processes, healthcare and travel, etc.

When pointed out that: a). Payments due had been calculated by DoT only up to 2016; b). Penalties and interest only up to 2019; and c). A 10-year moratorium has already been extended by the Supreme Court… The two were suddenly stoic in their silence. This is a Catch-22 situation, where burying its head in the sand is not going to spare the ostrich.

(The writer is a veteran journalist and communications specialist. Views expressed are personal)