Scatmag.com

November 2019

SC UPHOLDS TELECOM AGR - DTH NEXT?


On 24 October 2019, Justices Arun Mishra, S Abdul Nazeer, and MR Shah of the Supreme Court held that most of the revenues; "except one or two" as pointed out by DoT; will fall within the net of AGR. The Supreme Court ruled in favour of the Department Of Telecom (DoT) and against the mobile phone companies, in defining what is included in the "Adjusted Gross Revenue" (AGR) of telephone companies (telcos).

Telcos must pay 8% of their AGR as a license fee. Hence an increased AGR directly translates into a much higher licenses fee payable annually by each telco to the government.



HUGE LIABILITY

Initial estimates are that telcos will have to pay as much as ₹ 92,000 Crores as license fees (8% of AGR) & an additional ₹ 30,000 Crores as Spectrum Usage Charges (3% Of AGR), under the new definition of AGR and confirmed by the Supreme Court. The interest costs and penalties accumulated over the past 14 years of litigation exceed the original amount payable.


SC: AGR Must Be Calculated On Gross Revenue





TELCO'S PLEA

While the telecom operators maintained that AGR should be calculated only on revenue from Telecom services, the DoT opposed this view & sought to include all revenues accruing to telecom operators.


TDSAT VERDICT REJECTED

TDSAT in its judgment on the same matter had excluded the following from the definition of AGR: capital receipts, bad debt, distribution margins to dealers, forex fluctuations, sale of scrap and waiver of late fee. However, it also held that revenue from non-core sources such as rent, profit on the sale of fixed assets, dividend, interest, and miscellaneous income must be included while computing AGR.

DoT had appealed the TDSAT verdict in the Supreme Court.


SC UPHOLDS TELECOM AGR - DTH NEXT?

In a strongly worded judgement, the 3-judge bench of the Supreme Court concurred with DoT's interpretation of "Adjusted Gross Revenue" (AGR), confirming that Gross Revenues are to be used for computation of AGR. The apex court rejected the telcos' arguments as frivolous & the 14 years of litigation as delay tactics.

The judgement has strong negative implications for Indian DTH platforms, fighting a similar case in the Supreme Court. the Supreme Court has for telephone companies.


Huge AGR Liabilities For Dish TV, Airtel & SUN DTH. Some May Have To Shut Down



DTH NEXT HIT BY AGR?

DTH platforms have a very similar case pending in the supreme Court. They contest that sale of STBs, non DTH income etc be excluded from their AGR & therefore calculation of their license fee.

They may have to pay huge back dues on their license fees, if the SC rules against the DTH platform's views.

Currently TataSky is the only DTH platform that is paying its license fee in accordance with the government's interpretation of AGR. It has contested only a small portion of what it is paying.

Dish TV, Airtel & Sun DTH will have to cough up substantial amounts if the Supreme Court rules against them. The financial of some DTH platforms indicate they may have to shut down, if pushed to pay the AGR, interest & penalties in a time bound manner.

The case will probably come up for hearing in the Apex court, early next year. We will keep our readers informed.