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Sunday 5 July 2020

ICRA says AGR stressing, confusing telecom industry

The pressure of AGR dues has stressed the telecom companies financially, ICRA observed, adding the 20-year lenience has caused confusion

Investment Information and Credit Rating Agency (ICRA) of India Limited today said there was palpable precariousness in the telecom sector following the plea of the Department of Telecommunications (DoT) in the Supreme Court to prolong the period for the payment of this tax to 20 years. “The telecom industry is facing considerable uncertainty owing to the adjusted gross revenues (AGR) related dues that are required to be paid as per the Supreme Court order,” the firm in a statement said.

The investment information and credit rating agency said the players in this sector were confused about the timelines and financing of payments due to the statutory AGR-related dues. In October 2019, the apex court, while addressing the old dispute between telecom companies and the government, had not only upheld the demand of the DoT to include non-telecom service revenues in their AGR but also slammed the industry for dragging its feet on the issue. The judges had made some observations, which suggested they were exasperated.

Vodafone-Idea owes the highest amount of nearly Rs 53,000 crore to DoT. Bharti Airtel owes Rs 35,000 crore. Tata Teleservices Rs 14,800 crore. Vodafone-Idea has so far paid Rs 6,854 crore, Airtel Rs 18,000 crore and Tata Teleservices Rs 2,197 crore to DoT.

In fact, Vodafone had almost decided it would wind up its business in India.

The pressure to pay up their AGR dues has stressed the telecom firms financially, ICRA observed.

The DoT had in March sought the Supreme Court’s intervention to allow the 20-year term for AGR payment by the struggling companies. But the court hasn’t taken up the issue yet. It is hearing limited cases via video conferencing since the coronavirus disease (COVID) outbreak in the country.

ICRA says the industry was recovering this year after witnessing cutthroat competition in quality of services and pricing as well as increased debts. This growth, the agency said, was because of the steady average revenue per user improvements, initiatives of deleveraging and moderation in CAPEX intensity.

In December last, the firms had increased their tariff to overcome continued financial woes even as this led to customers dumping the services.

On the positive side, ICRA said the ongoing nationwide lockdown due to COVID-19 would have minimal impact on the telecom services. It believes while there is pressure on revenues due to limited customer addition and lack of physical recharges, the increased mobile usage on account of the ‘work from home’ regime is more than making up for the loss.

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