Vodafone’s shares jumped up by 14%:
Shares of Vodafone Idea on Friday jumped 14 percent after telecom tribunal TDSAT stayed Trai’s interim direction asking the company to withhold its priority plan that promises 4G network on a priority basis to certain premium users. The tribunal's decision provides temporary relief for Vodafone Idea Ltd (VIL).
Why in news?
The Supreme Court has directed the telecom companies (telcos) to file affidavits giving details on their Adjusted Gross Revenue (AGR)-related dues to the government.
What is AGR?
- AGR is the basis on which the Department of Telecom (DoT) calculates levies payable by mobile operators.
- Essentially, it is a metric calculated from a company's gross revenues.
- It is used to determine the levy to be imposed on the Tele-income.
What is the case about?
- The AGR issue is a 14-year-old case.
- It relates to mobile operators (telcos) locked in a legal battle with the government over the definition of the term AGR.
- The telecom providers insisted that AGR should only include revenue from core operations (telecom services).
- They say that other sources should be excluded from AGR calculations.
- But, the DoT maintained that AGR also embraced non-core revenue (non-telecom services).
- These include revenue from the sale of assets, interest on deposits, rental income, and such like.
What was the earlier court ruling?
- Ending the legal tussle, the Supreme Court in October 2019 rejected telcos' definition of AGR.
- It thus held that telecom companies have to pay fines and penalties on the unpaid fees, other than termination fees and roaming charges.
- The Court allowed the Centre to recover over Rs 92,000 crore from the already financially stressed telecom industry within 3 months.
- The order came as a major blow to the two incumbent operators, Vodafone Idea and Bharti Airtel.
- This, in turn, forced them to hike tariffs.
- In February 2020, the Supreme Court condemned the mobile operators for non-payment of dues.
- The court warned them with contempt proceedings if they did not pay up the dues by March 17, 2020.
What is the issue with non-telecom PSUs?
- Non-telecom companies hold nearly 3,500 telecom licenses, such as to provide Internet and national long-distance services.
- Some non-telecom PSUs were served demand notices by the DoT for over Rs 3 lakh crore of combined license fee dues.
- They include Gail India, Power Grid Corp of India Ltd (PGCIL), Oil India, and RailTel Corp.
- This was done following the Court's ruling in October 2020.
What is the present ruling?
- The court has been quite harsh on the government for having raised a demand for dues against non-telecom PSUs such as GAIL.
- The court viewed that as going beyond what it had mandated.
- It had also asked the DoT to clarify why it did so.
- The Court had also come down heavily on the DoT for allowing companies to re-assess what they owed the government.
- The Court also said that its October 2019 order on revenues for calculating dues was final.
- The two companies- Bharti Airtel and Vodafone Idea, sought some time to make the balance AGR payments.
- They agreed to have their licenses canceled in case they failed to meet the deadline.
- Repayment schedule - On the time required by the telcos, the Union government had decided on a 20-year repayment schedule.
- But the court has observed that nobody can predict the next 20 years.
- It thus said that the “gentleman’s promise” of 20 years cannot be a criterion for its judgment.
- This is naturally agreeable and thus the Court has asked the companies to file affidavits on timeframes.
- The court has also asked the companies to explain what security they will provide and what the road map for their payments will be.
What is the task ahead?
- At present, it is the Union government that is best-placed to judge the risk and return in the national interest in this case.
- The only concern is that it has to be done in a transparent and uncontroversial manner.
- The DoT also has the task of ensuring stability in the telecom sector and prevent it from becoming a monopoly.
- Besides the payment commitment, there must be a place for profit-making for the telcos if the sector is to survive.
- The Centre must also satisfy the court’s demands for a timeline for repayments.
- If 20 years does not meet with the court’s approval, it must find another timeframe that is both reasonable and acceptable.
- In all, the issue must be handled in a way that balances the interests of telcos, government, and consumers.
Source: Indian express