Adjusted Gross Revenue (AGR) refers to the total revenue generated by telecom companies, encompassing all revenue streams. This includes call charges, internet services, and non-core activities such as rent and the sale of handsets and other assets. The Department of Telecommunications (DoT) in India mandates that telecom companies pay a percentage of their AGR as license fees and spectrum usage charges.
The government employs AGR as a basis to calculate the fees that telecom operators must remit for utilizing spectrum (radio frequencies) and maintaining their licenses. This approach aims to generate revenue for the government from the telecom sector, which relies on public resources like airwaves. Additionally, it seeks to ensure a level playing field by regulating payments across all operators.
Telecom companies expressed opposition to the DoT’s expansive definition of AGR, advocating that only revenue derived from core telecom services, such as calls and data, should be considered when calculating fees. They contended that incorporating revenue from non-core activities inflated their liabilities, imposing a significant financial burden on them. This stance underscored their concerns regarding fairness and the potential jeopardization of their financial stability, particularly in an already competitive market with slim margins.
In a landmark decision in 2019, the Supreme Court of India ruled in favor of the DoT’s definition of AGR. The court determined that telecom companies must account for all sources of revenue, both core and non-core, in their calculations of dues. This ruling mandated telecom operators to settle outstanding dues amounting to approximately Rs 1.47 lakh crore, placing immense financial pressure on these companies and pushing some to the brink of bankruptcy.
The Supreme Court's ruling had profound financial repercussions for the telecom industry, with major players facing substantial liabilities. Companies like Vodafone Idea and Bharti Airtel found themselves significantly affected, as they were required to pay large sums of money in a compressed timeframe. The ruling also triggered calls from the industry for relief measures, including extended payment deadlines and reduced penalties, to assist companies in managing their financial burdens and ensuring the sector's continued viability.
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