Bharti Airtel Gains 4% As Supreme Court Dismisses AGR Verdict Review Petition

Shares of Vodafone Idea and Bharti Airtel moved in opposite directions on Friday after the Supreme Court (SC) dismissed the review petitions filed by the telecom companies seeking more time for payment of AGR dues and began contempt proceedings against the companies as well as the government.

Bharti Airtel rose as much as 4 percent while Vodafone Idea fell over 11 percent after the news

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The telecom operators have been directed to pay the Department of Telecom their dues by 17 March.

"These companies haven't paid anything since 20 years by way of AGR dues," said the bench by Justice Arun Mishra.

Contempt was drawn against the DoT officers for staying coercive action against the telecom companies for recovery proceedings and against the telecom operators for failing to meet the court-directed deadline.

The pleas were filed by Vodafone Idea, Bharti Airtel, and Tata Teleservices (to be merged with Bharti Airtel) seeking more time and fresh payment schedule to pay adjusted gross revenue (AGR) related dues to DoT, which has issued demand notices to them.

The Cellular Operators Association of India had earlier sought a 14-year period to pay off these dues.

On Thursday, Vodafone Idea posted a loss of Rs 6,400 crore and said that "the Company's ability to continue as a going concern is essentially dependent on a positive outcome of the application for modification of Supplementary Order before the Hon'ble Supreme Court and subsequent agreement with DoT for the payment in installments after some moratorium and other reliefs."

As it appears that Vodafone Idea is likely to get out of competition, if liquidation were to happen, and this would mean Airtel will be in a position to take up nearly 40 percent of the telecom market. With this, the telecom business in India becomes a duopoly (with Jio and Airtel as the key players), and Airtel will gain substantially considering its sole presence in the 2G market and strong positioning in the 4G market.

On 16 January, the apex court had dismissed review petitions of telecom firms seeking review of its earlier order asking them to pay Rs 1.47 lakh crore in statutory dues by 23 January, saying it did not find any justifiable reason to entertain them.

The verdict has grave revenue implications on the already ailing telecom operators that are facing tough competition after the entry of Reliance Jio.

AGR is DoT's measure to calculate levies payable by operators. Telcos argued that AGR should comprise revenue from telecom services, but DoT insisted that AGR should include all revenue earned by an operator, including that from non-core telecom operations. DoT's definition of AGR was upheld by the court, putting an end to a 14-year old legal battle.