AGR Definition amended by DoT; removes Non-Telecom items

In what has been the greatest update in a month and a half of telecom reforms, DoT has finally updated the AGR definition, removing non-telecom revenue items like dividends and interest. The department said that the move will come into force starting October 1.

Major Relief to the Telcos as AGR Definitions Gets Rationalized

Since 2005, the AGR and its definition has been a bone of contention between the telcos and the government. However, the DoT had won the case in September 2019, allowing it to collect AGR dues based on every bit of revenue a telco makes. This move, however, left the telcos looking at lakhs of crores in AGR dues. In fact, this had almost pushed Vodafone Idea, India's third largest telco, to bankruptcy; only a relief package announced last month has managed to change the fate of the telco.

However, on Monday, the DoT issued a statement, introducing the concept of present gross revenue, or APGR. The DoT will calculate this by removing all non-telecom revenue that telcos earn from their gross revenue. That means, the department will not include gains from exchange rate fluctuations, insurance claims, capital gains on selling fixed assets and securities, income from the USBF, recovered losses on receivables, written back excess provisions, income from activities under the I&B license and non-telecom-based income to calculate APGR. The APGR will also not include roaming revenue that telcos earn from each other.

DoT added, "this change will take effect from 1.10.21 and will apply to the charges arising from the licensee’s operations after that date".

Incidentally, the licensing fees and the erstwhile SUC also depends on AGR. Therefore, a lower AGR calculation will lead to lower licensing fees. The government had ditched the SUC for all future spectrum auctions under the relief package.

New AGR Definition Will Clear Grey Areas

The new AGR definition serves as a defining step in the right direction by the government. Not only will this relieve the present telcos, but it will also send a message to potential investors. Analysts also suggested that this move will clear all doubts regarding AGR and reduce litigation in the sector.

Currently, Jio, Airtel and Vi are the only private players in the telecom sector; the government, with its relief package, seeks to change the status quo. However, the Vodafone Idea situation only highlighted the problems within the regulatory framework of the telecom sector; the risks were too high for people to invest in the sector.

The telecom reforms will have far-reaching implications for the telecom sector, and we might have not seen the end of them. The telecom minister Ashwini Vaishnaw had commented that the government will work on another round of telecom reforms to make the sector the spearhead of digital transformation in India.