Another Supreme Court decision goes against India’s operators

Another Supreme Court decision goes against India’s operators

In yet another blow to some of India’s operators, an evidently aggrieved Indian Supreme Court has insisted that a number of telecommunications companies must pay some of their adjusted gross revenue (AGR) dues as directed by the court last October.

The court has also issued contempt notices after a Department of Telecommunications (DOT) officer directed a few weeks ago that no coercive action would be required at that time to recover the dues.

The court suggested that the companies at the very least deposit a “sizeable” part of the moneys owed (billions of dollars in the cases of Bharti Airtel and Vodafone Idea) to prove their bona fides in advance of a modification decision.

The companies, which also include Tata Teleservices and Hughes, had sought a modification of the court order to give them more time to pay their dues – or allow them to work out a payment plan with the government.

The three-judge bench was clearly not impressed by the actions of the DOT officer who effectively overrode its instructions. The no-coercion order was withdrawn by DOT soon afterwards.

As a verdict was not to be offered until after the payment deadline there seems to have been an assumption that the payment could be delayed. The court said that this was not so and made some fairly strong comments about a slow-moving case that has apparently seen no payment in the 20 years since a revenue-sharing fee model was first proposed.

The companies involved are obliged to deposit most or possibly all of what they owe before 16 March to avoid potential contempt charges. The next hearing is due on 17 March.

The likely result of all this is still being debated in the Indian and global press and among experts but some commentators have suggested that operators will need to raise tariffs by 20-25 percent to remain afloat. A more apocalyptic view is that, if it can’t get time to pay, Vodafone Idea may exit from India, effectively making the Indian market a duopoly.

This verdict certainly makes it more difficult for Vodafone Idea to delay paying a sum for retrospective licence and spectrum fees estimated at $7bn. Even if it stays in the market, its ability to invest in networks, with all that means in terms of gaining or keeping subscribers, will surely suffer.

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