The Supreme Court has said that the government should move to cancel licenses and spectrum if statutory dues are being wiped out. This will be tough for Reliance Communications (RCom) and Aircel, who are about to sell their assets including airwaves to a third party, but have pending adjusted gross revenue (AGR) dues. The government should move to cancel the license spectrum if dues are being wiped out. If telcos are unwilling to pay, we will directly cancel spectrum allocation, remarked Justice Arun Mishra, heading the three member bench in the AGR case.
- The Department of Telecommunications (DoT) has sought Rs 12,389 crore from Aircel and Rs 25,199.27 crore from RCom. Cancelling licenses of the telcos' most valuable assets would jeopardise resolution plans of the two telcos.
- Spectrum in both telcos is nominated to be picked up by asset reconstruction firm-UVARCL.
- However senior advocate Ranjit Kumar informed the bench that cancelling licenses would defeat the purpose of Insolvency and Bankruptcy Code (IBC) and no one will be willing to lend to telcos. He added that the resolution plan was decided by a committee of creditors (CoC) and their call needs to be respected.
- The SC has been inquiring about spectrum sharing and trading details between bankrupt telcos and Airtel and Jio to ensure that the AGR dues are not evaded by either party.
- On 24 August 2020, DoT filed an affidavit informing the SC that the AGR payments made by telcos can't be said to be full and final and that the government will await the court order to calculate final AGR liability on the traded/shared spectrum.
- DoT further said that AGR is based on entire revenue generated by a telco and is not dependent only on revenue from spectrum. The government had earlier alerted the top court that bankrupt telcos owe Rs 40,000 crore of statutory dues.
- The telecom sector was liberalised under the National Telecom Policy, 1994 after which licenses were issued to companies in return for a fixed license fee.
- To provide relief from the steep fixed license fee, the government in 1999 gave an option to the licensees to migrate to the revenue sharing fee model.
- Under this, mobile telephone operators were required to share a percentage of their AGR with the government as annual license fee (LF) and spectrum usage charges (SUC).
- License agreements between the Department of Telecommunications (DoT) and the telecom companies define the gross revenues of the latter.
- AGR is then computed after allowing for certain deductions spelt out in these license agreements.
- The LF and SUC were set at 8 percent and between 3-5 percent of AGR respectively, based on the agreement.
- The dispute between DoT and the mobile operators was mainly on the definition of AGR.
- The DoT argued that AGR includes all revenues (before discounts) from both telecom and non-telecom services.
- The companies claimed that AGR should comprise just the revenue accrued from core services and not dividend, interest income or profit on sale of any investment or fixed assets.
- In 2005, Cellular Operators Association of India (COAI) challenged the government’s definition for AGR calculation.
- In 2015, the TDSAT (Telecom Disputes Settlement and Appellate Tribunal) stayed the case in favour of telecom companies and held that AGR includes all receipts except capital receipts and revenue from non-core sources such as rent, profit on the sale of fixed assets, dividend, interest and miscellaneous income.
- However, setting aside TDSAT’s order, the Supreme Court on October 24, 2019 upheld the definition of AGR as stipulated by the DoT.