Telecom stocks pay for politics over 'under-reporting'

A day after the Congress accused the BJP-led government of giving a bonanza of Rs 46,000 crore to telecom firms, most stocks fell about 3%. Market experts, though, called it a knee-jerk reaction

The telecom sector has become everyone’s favourite whipping boy these days. A day after the Congress accused the Bharatiya Janata Party-led government of giving a bonanza of Rs 46,000 crore to the telecom companies, most stocks fell about three per cent. Market experts called it a knee-jerk reaction, as it is being feared that leading telcos may be asked to cough up Rs 12,500 crore each, if the loss to the exchequer due to alleged under-reporting of revenues is Rs 46,000 crore.

Shares of Bharti Airtel fell 2.3 per cent, Idea Cellular declined 2.9 per cent, while Reliance Communications fell 3.2 per cent and Tata Tele (Maharashtra) lost 3.8 per cent on the BSE. The benchmark Sensex on Friday ended 0.3 per cent lower.

Market experts termed it as fear-mongering by political parties and said not much is likely to come out of this exercise as the dispute over the definition of adjusted gross revenues (AGRs) and how telcos should report it has been going on for several years. 

Also Read: Congress Scores Another Self-Goal: Jaitley On Telecom Scam

Navin Kulkarni, telecom analyst at Phillip Capital said: “Typically these are high beta stocks and earnings are volatile, which is why they tend to witness such swings. One should not view this too keenly. We remain positive on the sector as consolidation is good for the market. This quarter should be good for the industry.”

Telecom analysts claim that the Rs 46,000-crore headline number is misleading. Sources in the government said that as per the CAG report, the shortfall amounts to Rs 5,000 crore of licence fee and spectrum usage charges and Rs 7,000 crore of interest, which is nowhere near the Rs 46,000-crore figure.

The CAG report on understatement of revenue by Rs 46,045.75 crore was received in February 2016. The report pertains to four years — 2006-07 to 2009-2010 — which is before the tenure of this government, the statement said. The six service providers are Bharti Airtel, Vodafone, Aircel, Reliance Communications, Tata and Idea. This under-reporting is an old story, say analysts. In 1999, when the government moved to revenue-sharing regime, the structure of revenue was to be decided in consultation with Telecom Regulatory Authority of India. The government came out with a definition of AGR, which included other income and operators went to court.

The department of telecom has said it is conducting a special audit of the telecom players and, after due diligence, might issue demand notices to the tune of Rs 12,500 crore plus penalty and interest. Currently, six auditors empanelled by the Comptroller and Auditor General have been auditing the books of the operators.