DCC may discuss telcos' AGR issue on Friday; COAI presses for relief

The Digital Communications Commission, the apex decision-making body in the telecom sector, is expected to meet on Friday to deliberate on a relief package for the financially stressed industry.

As directed by the Supreme Court, telecom companies need to pay Rs 1.47 trillion to the government towards licence fee and spectrum charge dues linked to adjusted gross revenue (AGR).

Of this, Bharti Airtel needs to pay Rs 35,500 crore and Vodafone Idea more than Rs 50,000 crore—they have paid just a fraction of the total till now.

The industry has made a string of demands including a moratorium, staggered mode of payment, lower licence fee and setting up of a tariff floor.

Sources said that any relief for the sector would come with riders.

“They (companies) cannot manipulate us, they have to make further payments before even seeking relief,” a Department of Telecommunications (DoT) official said.

The DCC, formerly known as the Telecom Commission, comprises officials from the departments of telecommunications, electronics and information technology, revenue, and think tank NITI Aayog.

The DoT is expected to make a presentation to the commission regarding the possible relief scenarios.

Cellular Operators’ Association of India, a body representing the telecom industry, on Thursday urged the Union government to step in so that the telecom sector can be brought back on track.

COAI, in a letter to Telecom Secretary Anshu Prakash, asked for easier terms for payment of statutory dues by telcos, including extension of loans at lower interest rates to cover the AGR liabilities, as also fast implementation of floor prices, to rescue the troubled sector.

The association has raised an alarm over banks’ unwillingness to take any risk. It has said banks must get a clear message from the government to support the sector.

Banks are “constantly asking telecom service providers to reduce their exposures by refusing to issue new bank guarantees or even to renew bank guarantees”, COAI Director General Rajan Mathews said in the letter.

It said the requirement of financial bank guarantees for securing licence fee payments should be done away with. In case the Telecom Department is of the view that financial bank guarantees are needed, the same should be reduced to one quarter of the licence fee, according to the association.

The COAI also sought an immediate cut in the licence fee levy to 3 per cent from 8 per cent, as well as a reduction in the spectrum usage charges.

Citing India’s low average revenue per user (ARPU) compared to markets like China, Brazil and Russia, COAI has also pressed for a floor price “to ensure the sector is sustainable’’.

Earlier in the week, Vodafone Idea made it clear to the government that it wouldn’t be able to pay the court-mandated AGR dues in its entirety, unless a bailout was extended immediately.

The Supreme Court, in October last year, upheld the government’s position on including revenue from non-core businesses in calculating the annual AGR of telecom companies, a share of which is paid as licence and spectrum fee to the exchequer.

The Supreme Court, earlier this month, rejected a plea by Airtel and Vodafone Idea seeking an extension in the payment schedule. The court asked companies to deposit their AGR dues immediately.

Vodafone Idea, in a letter to the DoT, has even sought adjustment of goods and services tax (GST) refund to the tune of Rs 8,000 crore against its AGR dues.

AGR dues: COAI seeks easier payment terms for telcos, cut in licence fee

Industry body COAI has sent out a distress signal to the government seeking easier terms for payment of statutory dues by telcos, including extension of loans at lower rates to cover AGR liabilities, as also fast implementation of floor prices, to rescue the troubled sect With the telecom industry plunging into a deep, unprecedented crisis, the association has raised an alarm over banks' unwillingness to take any risk with regard to the sector, and asserted the "need to give a clear message to banks that government is there to support the sector".

"Banks are currently unwilling to take any risk with respect to the telecom sector and are constantly asking telecom service providers to reduce their exposures by refusing to issue new bank guarantees or even to renew bank guarantees," COAI Director General, Rajan Mathews said in a letter to Telecom Secretary Anshu Prakash.

Cellular Operators' Association of India (COAI) has also said that the requirement of financial bank guarantees for securing licence fee payments should be done away with.

In case Telecom Department is of the view that financial bank guarantees are needed, the same should be reduced to one quarter of licence fee, as per the industry body.

COAI also sought an immediate cut in licence fee levy to three per cent from 8 per cent and reduction in spectrum usage charges.

Citing India's low average revenue per user compared to markets like China, Brazil and Russia, it further said data prices in India are a fraction of those in markets are US, China, Germany, France and others.

"Therefore, floor pricing is imperative to ensure the sector is sustainable and in a position to bear the deferred spectrum and adjusted gross revenue (AGR) dues, while continuing to invest in world class networks," COAI said.

COAI's letter, dated February 26, came even as Vodafone Idea has reportedly made it clear to the government that it won't be able to pay court mandated AGR dues in entirety, unless a bailout is extended immediately.

In all, 15 telecom entities owe the government Rs 1.47 trillion in unpaid statutory dues -- Rs 92,642 crore in unpaid licence fee and another Rs 55,054 crore in outstanding spectrum usage charges.

Of the estimated dues that include interest and penalty for late payments, Airtel and Vodafone Idea account for about 60 per cent.

These dues arose after the Supreme Court, in October last year, upheld the government's position on including revenue from non-core businesses in calculating the annual AGR of telecom companies, a share of which is paid as licence and spectrum fee to the exchequer.

The Supreme Court, earlier this month, rejected a plea by mobile carriers such as Bharti Airtel and Vodafone Idea for extension in the payment schedule and asked companies to deposit their past dues for spectrum and licences.

AGR: COAI urges govt to offer telcos 10-15 years for settlement of dues

Industry body COAI is pitching for a 10-15 year payment schedule for telecom companies to pay their past statutory dues, beginning with part-payment upfront and a two-year moratorium.

This formula of easier payment schedule to meet statutory obligations would offer the much-needed reprieve to telcos such as Bharti Airtel and Vodafone Idea, whose combined liabilities after the recent SC verdict run into billions of dollars, according to the Cellular Operators' Association of India (COAI).

COAI Director General Rajan Mathews said the industry requires a debt package for payment of past statutory dues with a two-year moratorium, as in the case of payment made for spectrum bought in auctions.

"Give telecom companies 10-15 years for payment of the full adjusted gross revenue (AGR) dues, a two-year moratorium and an interest rate at interbank borrowing rate levels that is at around 4-5 per cent," Mathews said.

There could be an upfront payment of about 15 per cent, which is equivalent of the principle AGR amounts, he added.

"The government will easily get Rs 15,000-20,000 crore only through upfront payments from large operators," Mathews said.

This will be a "reasonable" payment schedule for the crisis-ridden telecom industry, as it would allow them to invest money into network expansion and new technologies, the COAI said.

Fifteen telecom companies owe the government Rs 92,642 crore in unpaid licence fee and another Rs 55,054 crore in outstanding spectrum usage charges. These liabilities arose after the Supreme Court in October last year held that non-core revenues have to be considered for calculating statutory dues from adjusted gross revenue (AGR).

In the case of Bharti Airtel, the liabilities added up to nearly Rs 35,586 crore, of which Rs 21,682 crore is licence fee and another Rs 13,904.01 crore is the spectrum usage charge dues (not including the dues of Telenor and Tata Teleservices). Vodafone Idea, which is staring at unpaid statutory dues of Rs 53,038 crore, including Rs 24,729 crore of spectrum dues and Rs 28,309 crore in licence fee, has already warned of shutdown if no relief is given.

Bharti Airtel, Vodafone Idea Ltd, and Tata Teleservices have, meanwhile, jointly filed a modification application in the Supreme Court seeking more time to pay the statutory dues.

The fresh plea for relief on the payment schedule came after Supreme Court, earlier this month, dismissed the review petitions filed by telecom companies against the apex court's October 24, 2019, verdict.

Tariff hike will boost govt revenue, telcos' financial health, says COAI

Mobile operators' association COAI has told the government on the recent tariffs hike by the telcos will improve their financial health, and borrowing capacity and boost the AGR collection for the government.

In a letter to DoT Secretary Anshu Prakash, Cellular Operators Association of India Director General Rajan Mathews said: "Historically telcos have reduced tariffs, but the present increase is motivated by the dire financial situation of most TSPs, resulting from unsustainable levels of debt incurred for payments of spectrum won in auctions."

The hyper competition in the industry has lead to financially unsustainable tariffs that have reduced profits after tax to single and sometimes negative amounts, and the return on capital has sunk to low single digits, he said in the letter.

There is also pressure of doubling up of both upfront spectrum payments and continued revenue share obligations which cumulatively amount to approximately 14-15 per cent AGR. And this, along with GST of 18 per cent, means that over 30 per cent of the top line revenues of the TSPs goes to the Government by way of taxes and levies, said COAI.

The letter further said both domestic and international banks are unwilling to provide any form of liquidity to the TSPs given the poor financial prospects of the operators. This has created shortfalls in working capital funds and resulted in severe debt servicing.

Still in spite of such a situation, TSPs, even after the tariffs hikes, continue to provide lowest tariffs for data at Rs 11 for 1 GB. This is much below the rates paid by consumers 4 years ago at Rs 225 per GB and Rs 330 in 2010, the COAI noted.

Voice rates have also been low with ARPU at Rs 80 from Rs 118 in 2017 and Rs 141 in 2010, it added.

The COAI's letter also said the hikes will improve financial health of the telcos, their borrowing capacity, result in more dues to the government with higher AGR and their network expansion and upgrading, which will lead to better quality of services.

Grant 3-yr moratorium, extended timelines for payment of dues: COAI to govt

The government should grant telecom companies a three-year moratorium followed by an extended timeline for payment of all statutory dues at easier interest rates, as the telecom sector is reeling under massive losses after the Supreme Court ruling on AGR liabilities, COAI said on Monday.

Cellular Operators Association of India (COAI) Director General Rajan Mathews told PTI that operators need "oxygen" and urged the government to take a call on debt restructuring of all the dues that telecom operators owe to the government.

Mathews said most 4G licences have 11-year validity left, and that the government could pack in another 10 years, thus allowing operators to pay back all the outstanding dues spread over the entire licence period.

"It is also time to redefine AGR (adjusted gross revenue) prospectively," Mathews said.

The telecom industry has been haemorrhaging, with combined losses of listed mobile network firms surpassing Rs 1 trillion in the September-ended quarter.

Last week, India's two leading telecom operators Vodafone Idea and Bharti Airtel reported a combined loss of Rs 74,000 crore for the second quarter ended September 2019, mainly on account of statutory dues arising from the recent Supreme Court order on AGR.

The apex court upheld the government's position of including revenue from non-telecommunication businesses in calculating the annual AGR of telecom companies, a share of which has to be paid as licence and spectrum fee to the exchequer. The ruling over statutory liabilities has triggered a rush for provisioning by telecom companies.

While Vodafone Idea posted a loss of Rs 50,921 crore, the highest-ever quarterly loss by any company in India, Airtel reported a loss of Rs 23,045 crore.

On Friday, Reliance Communication posted a consolidated loss of Rs 30,142 crore for the July-September 2019 period due to provisioning for liabilities after the Supreme Court ruling on statutory dues -- marking second-highest loss posted by any Indian company till date.

Airtel, Vodafone Idea and other telecom operators have to pay the government a whopping Rs 1.4 trillion following the Supreme Court order that has sent shock waves through an industry already grappling with past losses and billions of dollars in debt.

According to latest estimates by the telecom department, Bharti Airtel faces a liability of around Rs 62,187 crore (including share of Tata Group of companies and Telenor India), while Vodafone Idea may have to pay about Rs 54,184 crore. The remaining liability is with state-owned BSNL and MTNL and some of the shut or bankrupt telecom companies.

Stung by colossal losses, Vodafone Idea has said its ability to continue as a going concern is dependent on obtaining relief from the government and positive outcome of the proposed legal remedy. The company is also in the process of filing a review petition against the Supreme Court order.

The Department of Telecommunications (DoT) had shot off notices to telecom operators to pay their revenue share dues within three months as directed by the Supreme Court. The DoT has given option to telecom operators to clear all the dues on self-assessment basis.

Last month, the government also constituted a committee of secretaries to explore a financial bailout package for the telecom sector.

AGR ruling: COAI ignores Jio's protest; seeks full waiver of telcos' dues

Ignoring its member Reliance Jio's contentions, telecom industry association COAI has shot off an 'addendum' to its earlier demands and has now sought a complete waiver of statutory dues that its other members such as Bharti Airtel and Vodafone-Idea owe to the government following the Supreme Court ruling.

The Cellular Operators Association of India (COAI) director-general Rajan S Mathews on October 31 shot of a second letter in as many as days to Telecom Minister Ravi Shankar Prasad seeking waiver of the "entire" amount of Rs 1.42 lakh crore due to its principal members Bharti Airtel and Vodafone Idea Ltd and other telecom operators "given the poor financial state of the sector."

The Supreme Court on October 24 upheld the government's position on including revenue from non-telecommunication businesses in calculating the annual gross revenues of telecom companies, a share of which is paid as licence and spectrum fee to the exchequer. It directed the telcos to pay the principal due together with interest and penalties within three months.

"However, if such a step (complete waiver of all dues) is not possible, we request that the government waive off the interest, penalty and interest on penalty. Since the disputed payments go back to accumulation over the past 14 years, we request that the principal repayment of past dues be done over a period of 10 years, with a two-year moratorium," he wrote.

The demand made by COAI is exactly the same as the one made in an unsigned paper submitted to the Telecom Ministry on the day Bharti Airtel chief Sunil Bharti Mittal and his brother Rajan Mittal met Prasad and Telecom Secretary Anshu Prakash.

Billionaire Mukesh Ambani's Jio, which is also a member of COAI, has been contesting claims of the inability of telcos to pay the statutory dues, for which they ideally should have provisioned in accounts in view of a legal dispute.

Jio says COAI shot off the first representation to the government on October 30 without waiting for its comments. It feels COAI for the benefit of some of its members is using a "threatening and blackmailing" tone in its communication to the government on the non-existent crisis in the sector following the Supreme Court ruling on payment of statutory dues.

Jio has separately written to Prasad opposing any bailout to telecom companies at taxpayer's expense and asserted the COAI should not be considered an association representing the industry.

It has accused COAI of writing to government "under the influence of two of its members in furtherance of their vested interests" and accused the association of acting as a "mouthpiece of two service providers" and harboring a negative bias towards Jio.

There was no case for seeking any financial support from the government after the industry exhausted all its legal recourse, it feels.

Mathews in the October 31 letter stated that the support "will go a long way to ensure that the sector can start the path of recovery from the current situation over time and serve the cause of Digital India."

With the telecom sector staring at a massive Rs 1.4 lakh crore payout following a Supreme Court order, the unsigned memorandum to the government had asked it not to press for adjusted gross revenue (AGR) dispute payment in its entirety, sources said adding the note argues that it could not be the intent of the government to enrich itself by charging licence fee and SUC on non-licensed revenue or income.

In the worst-case scenario, it has requested the government to levy only the principal amount (without any interest or penalty) pertaining to only license fee (not spectrum usage charges) that should be allowed to be paid over a period of 10 years without interest.

It sought a two-year moratorium on spectrum payments beyond April 2020 till March 2022, to ease the cash flow pressures on the industry without compromising the net present value of spectrum dues to the government. This will allow continuity of business investment in critical network deployment and purchase of additional spectrum, it said.

It further sought a reduction in licence fee from 8 per cent of annual revenues to 3 per cent, and said that the balance 5 per cent representing USO contribution be waived or suspended till the current unutilised fund of Rs 50,000 crore is used.

Ensure equitable work, no monopoly under access coverage scheme: COAI

Industry body COAI has pushed for an "equitable" distribution of work and subsidy for all four access services providers in covering unconnected villages and asserted that the programme "should not create any monopoly".

Communications Minister Ravi Shankar Prasad during his interaction with CEOs of telecom companies last month had asked the industry to prioritise connecting 43,000 villages that are without mobile services, by pooling in resources to cover these locations within one year.

In a letter addressed to the new Telecom Secretary, COAI has pledged industry's full support in collaborating with the government to take forward the initiative of accelerating mobile connectivity in villages.

The Cellular Operators' Association of India (COAI) further highlighted that the scheme should be for compensation of cost and should not become a "profiteering scheme".

"Distribution of work and subsidy should be equitable for all the four access providers...It should not create any monopoly," COAI said.

The association has submitted a joint proposal to the government on uncovered villages programme, making specific suggestions on how the scheme should be designed, its principles, methodology and various other aspects.

In the letter dated August 16, 2019, COAI has said that there should be no duplication of infrastructure and only one telecom player should build tower infrastructure (passive infrastructure) which should be shared by all operators.

"Infrastructure sharing amongst telecom service providers should be mandatory and integral part of the scheme," COAI said. About 60 per cent of the subsidy should be given upfront and the balance 40 per cent on a quarterly basis, it added.

It has also suggested that the lowest bidder should become the lead bidder and should be awarded both passive and active work, and the second-lowest bidder should become the second operator and be subsidised only for active equipment.

"No operator should be awarded more than 35 per cent of the bidding units/villages as a lead operator," COAI said adding that villages should be classified into three lots and pool of sites for bidding should be structured such that each pool has a fair mix of villages.

Quality of Service standards should be relaxed to take into consideration terrain, difficulty of access of operations, weather, as well as 'force majeure' conditions.

"All Government buildings (both State and central), land and facilities to be made available for installation of cell towers and mobile infrastructure. Destruction of telecom infrastructure to be considered as a non-bailable criminal offence with deterrent punishment," COAI said.