AGR verdict last straw in contributing to industry's financial distress: COAI

Industry body COAI on Thursday expressed deep disappointment over SC ruling on telecom revenue definition, and termed it the last straw in contributing to the sector's financial distress.

The Cellular Operators' Association of India (COAI) said in a statement that it remains to be seen whether the industry -- which is reeling under a daunting debt of about Rs 4 lakh crore and is in dire financial straits -- will be able to recover from this setback.

"The Supreme Court's judgment is the last straw in contributing to financial distress and it remains to be seen whether the industry will be able to recover from this setback. The immense financial pressure on the sector will also adversely impact 'Digital India' rollout," Rajan S Mathews, director general of COAI, said.

The association expressed "deep disappointment" over the judgment on the definition of adjusted gross revenue (AGR) which it said will have an impact of over Rs 92,000 crore on the industry.

"With over 1.19 billion subscribers, the telecom sector is a key contributor to the Indian economy in terms of consumer benefit, employment, revenue generation and contributes 6.5 per cent to the GDP (gross domestic product).

"The sector has the lowest tariffs in the world backed by the investment of over Rs 10 lakh crore in setting up world-class mobile networks over the last 20 years but is going through one of its most disruptive phases," Mathews said.

The telecom sector's earnings before interest, tax, depreciation and amortisation (Ebitda) continues to contract, while the interest expense of the industry continues to increase, Mathews added.

In a setback to telecom service providers, the Supreme Court on Thursday allowed the Centre's plea to recover AGR of running into thousands of crore from them. It added that the service providers would have to pay penalties and interests to the Department of Telecommunications (DoT).

Telecom major Vodafone Idea has warned that the latest verdict on definition of telecom revenue will have "damaging implications" for the industry, and indicated it could explore filing a review application after legal consultation.

Expressing disappointment over the SC ruling, Vodafone Idea also exhorted the government to engage on the matter to find ways to mitigate financial stress of the industry.

Sunil Mittal-led Bharti Airtel has said the verdict on AGR will weaken viability of telecom sector, and the government must review its impact and find ways to mitigate financial burden on the already stressed industry.