Telcos to pay fee for activities covered under scope of licence, says DoT

The Department of Telecommunications (DoT) said that only activities covered under the scope of licence will be classified as telecom activities and they will be used to calculate adjusted gross revenue (AGR).

Experts said that this clarification has brought relief to a debt-laden industry as carriers need to pay eight per cent of AGR as licence fee.

They estimate that roughly 10 per cent of an operator’s overall revenue comes from non-telecom activities, according to a report in The Economic Times (ET).

In September 2021, the government had notified that non-telecom revenue would be excluded from the definition of AGR from October 1, 2021. But there was no clear definition of what constitutes revenue from telecom operations, which prompted the industry to seek clarity from the DoT.

Telcos pay licence fees and spectrum usage charges (SUC) based on the AGR.

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The DoT stated: “Scope of licence clause in the licence agreement defines services which can be offered under the licence. All activities covered under the scope of licence will be classified as telecom activities.”

The industry had sought clarification on “revenue from operations other than telecom activities/operations” since it is not defined in the licence agreement.

The DoT has not defined non-telecom activities as they will vary among different companies.

The DoT said that non-core telecom items such as insurance claims, capital receipts, capital gains on mergers, revenue earned from licences issued by the Ministry of Information and Broadcasting (MIB), income from dividend, gains on mutual funds, gains from foreign rate fluctuations, interest on direct tax/indirect tax, and refunds won't be included while calculating the AGR, according to the ET report.

Praveen Sharma, secretary, the Internet Service Providers Association of India (ISPAI), said that the clarification issued by the DoT on the definition of gross revenue (GR) and AGR post reforms of October 2021 are path-breaking.

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"It brings in greater regulatory certainty in licence fee assessment,” Sharma said.

With the telecom reforms of 2021, the DoT had implemented the principle of ‘applicable gross revenue (ApGR), which is arrived at by deducting certain items of revenue from gross revenue. The AGR is calculated by deducting permissible deductions as defined in the licence agreement from the ApGR.