Vodafone Idea seeks urgent Supreme Court hearing on revenue dues

Vodafone Idea Ltd (Vi) urged the Supreme Court Monday to urgently hear its curative petition against an earlier court order regarding its adjusted gross revenue (AGR) dues.

Chief Justice D.Y. Chandrachud assured the telecom company that a decision on listing the case would be made soon.

Senior advocate Harish Salve, representing Vodafone Idea, said the company was looking to raise debt funding to pay its dues, but potential lenders require clarity on the company’s exact liability.

Vodafone Idea had filed the petition last year, Salve said.

He argued that the department of telecommunications (DoT) had committed errors in computing the final demand and that Vodafone Idea was not given a hearing before the penalty was imposed.

Telecom operators are required to pay a certain percentage of their adjusted gross revenue as an annual licence fee to the government, making the definition of what constitutes AGR critical for their profitability.

Salve also said Vodafone Idea had undergone a restructuring, referring to its decision to convert government dues to equity, making the Indian government the largest shareholder in the company with over a 32% stake.

₹1 trillion in telecom dues

Both Bharti Airtel Ltd and Vodafone Idea filed curative petitions in September.

The petitions stemmed from a Supreme Court order dated 1 September, 2020 requiring telecom companies to pay their AGR dues over a 10-year period. In July 2021, the Supreme Court dismissed a plea seeking corrections in the demand of AGR dues, with telecom companies claiming multiple errors in the computation, which totalled more than ₹1 trillion.

Vodafone Idea, in its plea to the Supreme Court, raised concerns about its financial crisis, stating that the AGR demands exceeded the principal amount and insisting that it acted in good faith in disputing revenue definitions.

The apex court had in its 2020 ruling instructed the telecom companies to pay 10% of their dues upfront by 31 March, 2021, with a deferred payment schedule extending until 2031. Each year, 10% of the amount was to be paid by March 31.

The Supreme Court had also stated that there would be no revaluation of AGR dues, and any default would result in interest, penalties, and contempt of court charges.

The DoT had estimated that Airtel owed ₹43,980 crore in AGR dues, while Airtel’s own estimate was ₹13,004 crore. For Vodafone Idea, the DoT’s demand was ₹58,254 crore, compared to the company’s assessment of ₹21,533 crore. Tata Teleservices faced a demand of ₹16,798 crore, whereas its calculation was ₹2,197 crore.

A dispute over definition

The issue dates back to the National Telecom Policy (NTP) of 1999, which allowed telecom companies to pay their license and spectrum fees as a percentage of their annual income. However, disputes arose over the definition of gross revenue, with telecom companies arguing that AGR should only include income from telecommunication activities, while the DoT argued for a broader definition that included all revenue.

In 2015, the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) ruled that AGR should be calculated based only on revenue from telecommunication services.

However, in 2019, the Supreme Court ruled that AGR should be based on a company’s total revenue, regardless of its source, and allowed the Centre to recover about ₹92,000 crore from the companies.