Time to move on: Telcos should build business plans sans govt relief

The industry must focus on further rationalisation of tariffs, which will possibly result in a much better ARPU - a metric that captures the health of the telecom sector and its stakeholders

The telecom industry is once again engaged with the Union government to seek relief on their dues related to adjusted gross revenues (AGR) after the Supreme Court recently dismissed a curative petition on the matter. Now, telecom-service providers would do well to move on and prepare for a robust future on their own. It’s a fact that the telecom industry experienced considerable disruption in the recent past and any relief on its AGR dues would give telcos the room to invest significantly in 4G and 5G services and strengthen their network capacities. It is, however, equally true that every industry goes through ups and downs and the government is not obliged to step in to reduce levies and charges even when companies need the intervention to stay afloat.

Among the telecom companies, financially stressed Vodafone Idea, with AGR dues of over ~70,000 crore, may face the impact of the latest Supreme Court verdict the most. The telco’s balance sheet is stretched with liabilities amounting to an estimated ~2.5 trillion. Even so, it’s important to remember that telcos, especially Vodafone Idea, have benefited from a clutch of government and court decisions in the recent past. For instance, to prevent the telecom industry from slipping into a duopoly, the government had last year acquired a stake in Vodafone Idea, converting the telco’s interest obligation into equity. However, the stake of the government, which was the biggest shareholder in Vodafone Idea at 33 per cent in 2023, came down after the telco’s follow-on public offer (FPO). As of August 2024, the government held a 23.1 per cent stake in Vodafone Idea. In another example of relief to the industry, the Supreme Court, responding to telecom players’ plea in 2020, allowed the telcos to pay up their AGR dues over a 10-year period. In addition to these interventions, the telecom industry had also received a relief package from the government in 2021. This included a four-year moratorium on payment of statutory dues by the telecom companies. 

The petition rejected by the Supreme Court recently was filed by Vodafone Idea, Bharti Airtel, and Tata Teleservices against a 2019 ruling of the apex court regarding the payment of AGR dues. A three-judge Bench, headed by Chief Justice D Y Chandrachud, upheld the government’s calculation method while refusing to hear the telcos’ plea for computing the amount afresh. The telcos argued the government calculation of the dues was flawed and needed a relook. According to the 2019 verdict, the AGR dues of Vodafone Idea and Bharti Airtel were estimated at ~1.47 trillion.

After the curative petition setback, the Vodafone Idea management, in a call with investors and analysts, said it was up to the government now to address the issue of “wrong calculation” of dues. Even though a correction in the AGR computation may help the telcos, they must now set their business goals without expecting any substantial government relief at this point. The industry must focus on further rationalisation of tariffs, which will possibly result in a much better average revenue per user — a metric that captures the health of the telecom sector and its stakeholders. That may also go a long way in ensuring that the telecom sector is not reduced to a duopoly and competition stays alive in letter and spirit.