Understanding AGR Dispute And India’s Changing Telecoms Industry

Understanding AGR Dispute And India's Changing Telecoms

The Supreme Court has reserved its order on the timeline of payment of Adjusted Gross Revenue (AGR) due of telecoms. Companies are struggling to hold their presence in the market. Telecoms giants have asked SC to give 15 years of time to repay this due. Let’s understand how a change in the definition of AGR resulted in a huge amount of debt for telecoms in India and whether this would change the landscape of the industry.

Crux of the Matter

SC’s Stand Over The Matter
After hearing telecoms on the matter of due and payment timeline, the Supreme Court has reserved its order on the timeline of payment of Adjusted Gross Revenue (AGR) due of telecom companies. Since the amount of due is huge, the government has proposed to give a timeline of 20 years to pay all the dues. But companies have shown their readiness to pay dues even in 15 years. Moreover, SC has denied reassessment of AGR dues. Government calculated amounts will be taken as the final amount for AGR dues.

Adjusted Gross Revenue
Adjusted Gross Revenue (AGR) is the usage and licensing fee that telecoms are charged by the Department of Telecommunications (DoT). AGR is divided into spectrum usage charges and licensing fees, pegged between 3-5% and 8% respectively. The dispute is about what particulars to include in the calculation of AGR. DoT says that AGR should be levied on total revenue. But in 2005, the Cellular Operators Association of India (COAI) challenged DoT’s definition, saying AGR should be calculated on revenue from core operations and exclude non-core revenue such as rent, dividend, interest, etc. In 2015, Telecom Disputes Settlement and Appellate Tribunal (TDSAT) ruled in favor of COAI and telecoms. But In 2019, SC upheld DoT’s definition of AGR, and hence companies are paying accumulated dues of past years.

Premium Plans Controversy
Recently, TRAI had ordered telecom giants to block their premium plans with immediate effect. Vodafone Idea and Bharti Airtel offered premium plans RedX and Platinum respectively. The consumer having premium plans can get better and faster services with high-speed internet. Considering this, Reliance Jio lodged a complaint claiming that providing better services to one set of customers would ‘undoubtedly deteriorate service quality to another set of customers’. In July 2020, TRAI ordered telecom giants to block these plans with immediate effect. TRAI’s argument was regarding the disruption of service and misleading advertisement of faster speed.

Companies replied that they are using ‘advanced technologies’ to help the premium customers get better service and faster speeds without impacting other users. In addition, telecom operators say that they need flexibility on tariff plans if the government is not ready to decide floor price. Soon after TRAI’s orders, Vodafone-Idea moved to TDSAT challenging the order. TDSAT stayed TRAI’s orders and allowed Vodafone-Idea to onboard new customers, but asked TRAI to continue its investigation of the premium plans offered by Airtel and Voda-Idea.

  • The name Vodafone comes from voice data fone (phone), chosen by the company to “reflect the provision of voice and data services over mobile phones”. Racal Electronics, the UK’s largest maker of military radio technology, formed a joint venture with Millicom called ‘Racal’, which evolved into the present Vodafone.
  • As of 31 Dec 2019, India has the world’s second-largest Internet user-base with 661.94 million broadband internet subscribers in the country. It has one of the lowest call-tariffs in the world enabled due to hyper-competition among mega telecom operators.
  • Telecom Regulatory Authority of India was established on 20 February 1997 by an Act of Parliament to regulate telecom services and tariffs in India. Earlier regulation of telecom services and tariffs was overseen by the Central Government. The current Chairman of TRAI is Ram Sewak Sharma.