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Telcos stare at repayment default as Supreme Court rejects review

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NEW DELHI: The Supreme Court’s decision to dismiss review petitions of top telecom companies on its Adjusted Gross Revenues (AGR) payment order leaves the sector open to statutory and bank repayment defaults, and piles fresh pressure on Vodafone Idea and Airtel, which are already groaning under tight market conditions.

The two companies, worst affected by the top court’s decision to make the telecom industry cough up Rs 1.47 lakh crore in previous dues, have now decided to file a curative petition, though analysts say that chances of a relief may be rare. If they fail again, then the sector — which has already shrunk from around a dozen players a few years ago to three private operators now (apart from state-owned MTNL and BSNL) — may shrink further.

Vodafone Idea chairman Kumar Mangalam Birla has already said it may be the “end of the story” if relief was not forthcoming on the AGR issue, with the company ordered to pay Rs 53,038 crore to the government by January 24. “It does not make sense to put good money after bad. We will shut shop,” he had said recently when asked if his group or Vodafone plan to make fresh investments in the company.

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Airtel chairman Sunil Mittal has had a series of meetings with the government on the matter, and the company has already warned that its ability to remain a going concern may be severely hampered if the government, or the top court, does not give relief on the AGR matter. “We have gone through several crises before, but this probably is the most difficult time for the industry,” he had said.

The government — which was the original petitioner in seeking the dues (that are a combination of disputed payments, interest thereon, and penalty) has been watching the situation “very closely”. Top officials have strongly indicated that the government “does not want any company to shut down” because of the financial mess, and thus “all kinds of options are being explored”.

The top court order can also translate as a windfall for the government as it receives dues from telecom companies. This will help in easing the tight fiscal situation to some extent, amid the backdrop of sluggish tax revenues.

“We do not want a monopoly in the telecom sector, and clearly, we want a three-plus-one situation in the Indian telecom industry (that means the presence of Reliance Jio, Airtel, Vodafone Idea and a combined BSNL-MTNL),” one of the top officials has been reiterating.

However, with the top court not warming up to a relook of its order, a relief looks difficult. One issue that provides some chances of a review by the top court is the presence of a number of state-owned companies (such as Gail, Power-Grid, Railtel, Delhi Metro) who have been caught in the DoT-telecom AGR crossfire. These non-telcos held telecom licences to provide a range of offerings such as internet services, national and international long-distance services and VSAT services, and have also been asked to pay the government heavy dues (almost equal to what telecom companies have been asked) on their overall revenues.

Analysts say that there is a chance that their plea could get some positive reaction from the top court.

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