DoT amends AGR definition to remove non-core items

The Department of Telecommunications (DoT) has removed a host of non-telecom income items such as income from property rent, pidend and interest from calculation of adjusted gross revenue (AGR). The move is applicable from October 1.

In a notification issued late Monday night, the DoT introduced the concept of the applicable gross revenue (ApGR) which is arrived at by removing all the non-telecom revenue earned by telcos from their gross revenue (GR).

Gains from forex fluctuations, insurance claims, capital gains on account of sale of fixed assets and securities, receipts from Universal Service Obligation Fund, bad debts recovered, excess provisions written back, revenue from activities under the I&B licence and revenue from operations other than telecom activities will now be excluded from gross revenue to arrive at the ApGR.

AGR would then be arrived at from the ApGR, after further removing some more non-telecom service related items. Items to be removed include “roaming revenue passed onto other eligible/entitled telecommunication services providers”.

Licence fees and spectrum usage charge (SUC) are paid on the basis of AGR. Hence, a lower AGR will mean reduced related levies. SUC however has been abolished on future purchase of airwaves from auctions.

“This amendment comes into effect from 1.10.21 and will be applicable to the dues which arise from the operations of the licensee after the said date,” the DoT said.

Changes have also been made to the licences for other categories of telecom license holders such as internet service providers, national and international long-distance service providers and those offering mobile communication by satellite services.

The new definition is part of the mega telecom relief package the government announced on September 15 in order to revamp the sector and reduce the burden on the industry which was on the brink of becoming a private sector duopoly. Reliance Jio, Bharti Airtel and Vodafone Idea – the only loss making private telco – are the three private players in the market currently. Vodafone Idea is banking on the relief measures to revive its fortunes in India.

The definition of AGR has been the subject of a long-standing battle between the government and telcos – in fact since 2005 – which the DoT won in September 2019 in the Supreme Court.

The court then backed the government and widened the definition of AGR to include non-telecom items. But this left India’s older telcos – Bharti Airtel and Vodafone Idea – facing a combined Rs 1.02 lakh crore in AGR-related licence fees and SUC dues, pushing the already struggling Vodafone Idea further toward a possibly fatal financial crisis, said analysts.

The fresh definition for AGR excluding all non-telecom revenue could help clear all the doubts and grey areas which have been a bone of contention between the telcos and the government, analysts said.

As part of the relief measures announced last month, the government also permitted telcos to defer their AGR and spectrum payments by four years and gave options of converting statutory dues into government equity. The package also sharply reduced the requirement of bank guarantees, among other measures, as the government tried to resuscitate Vodafone Idea.