TWO WEEKS AFTER THE Supreme Court’s judgement on adjusted gross revenues (AGR), which rattled the telecom sector, a Delhi-based top corporate lawyer, whose clients include the likes of Reliance Jio, Bharti Airtel and Vodafone Idea, was travelling to the UK for meetings with foreign lawyers who advise companies on overseas investments. The key takeaway from his meetings was that India is no longer an attractive investment destination in general. “Everybody was asking about the AGR judgement. They couldn’t believe that the liability of a court judgement is so huge that a telco of Vodafone’s size is mulling withdrawing from India,” the lawyer says.
Being one of the most litigious sectors, telecom was long seen as the El Dorado for corporate lawyers. But the recent chain of events has shattered even their confidence. Why? The amount that the telcos are liable to pay for the lost case runs into billions of dollars, and can potentially result in one or more telcos winding up. There are currently three private telecom companies and two public sector ones vying for the 1.19-billion Indian subscriber market.
It’s an existential crisis for legacy operators as they will have to shell out over ₹92,642 crore for licence fees and another ₹55,054 crore for spectrum usage charges (SUC) under the AGR dues. Although the demand has been made from 15 operators, over 70 per cent has to come from just three operators – Vodafone Idea, Airtel and the insolvent Reliance Communications. Many of the other penalised operators have already shut shop.
“We consider the recent SC decision on AGR a big event for the India telco sector which could turn it into a dominant two-player market between Airtel and Jio,” Bank of America Merrill Lynch said in a November 13 report.
This story is from the December 15, 2019 edition of Business Today.
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This story is from the December 15, 2019 edition of Business Today.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
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