AGR Dues: Vodafone-Idea And Airtel Might Increase Tariffs By 10%

By | September 2, 2020

The Supreme Court has finally cleared its stand on the AGR issue and ordered telecom operators to pay all dues by 2031. Besides, the apex court has also asked the bankruptcy court to take a decision on insolvency proceedings.

However, the verdict is expected to affect the pockets of customers as telcos are likely to raise tariffs in the coming days. The decision comes at that time when Airtel has already shared its plan regarding tariff hike. In fact, there are high chances that companies might increase tariffs by 10 percent as they have to clear some payment of dues within seven months (March 31, 2020).

“Keeping spectrum costs and other investments aside, service providers need an ARPU of at least $3-4 in the near future for the capital expenditure required to provide for the surge in data usage. Therefore, there should be a significant tariff hike in the next quarter,” Sanjay Kapoor, Entrepreneur & TMT Advisor said after the Supreme Court announced its verdict on the AGR dues.

Similarly, research firm ICRA said in a new report that the debt on the industry is likely to increase in the coming months as seven months to pay 10 percent of AGR payment. “Despite the improvement in cash flow and moderation in capex intensity, the debt is further expected to increase to Rs. 4.6 lakh crore as on March 31, 2021, owing to the addition of AGR dues,” ICRA said.

On the other hand, research firms like Morgan Stanley, BofA Securities, and Motilal Oswal believe that Airtel will be benefitted from the Supreme Court ruling as it can easily pay its instalments.

What Is Adjusted Gross Revenue And Why There Is So Much Issue About The Payments?

Adjusted Gross Revenue is a revenue share fee between telcos and the Department of Telecom. Earlier, it was fixed and high. But, now operators have to pay only 8 percent for all the licenses to offer their services. The government has changed the model in 2013.

The AGR Dispute?

The Department of Telecom wants to include all services under AGR, while telcos want to share revenue from their telecom services. But, last year, in October the apex court has accepted the government views on the AGR and asked operators clear dues.

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