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MarketScreener Homepage  >  Equities  >  London Stock Exchange  >  GlobalData Plc    DATA   GB00B87ZTG26

GLOBALDATA PLC

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Government aid is required to sail Indian telcos from AGR storm, says GlobalData

04/21/2020 | 09:20am EST

The telecom sector in India, which is already reeling under a debt of around US$54.46bn, has come under more pressure due to the recent Supreme Court ruling on adjusted gross revenue (AGR) dues, says GlobalData, a leading data and analytics company.

Since 2005, there has been an ongoing dispute between the Department of Telecommunications (DoT) and the telcos in India regarding the definition of AGR, with the telcos asserting that only core revenue is considered for AGR calculation.

In October 2019 the Supreme Court ended more than a decade old proceedings by accepting DoT's definition. In February 2020, the Supreme Court came down heavily on telcos and directed them to pay the AGR liabilities at the earliest. As per DoT estimates, Bharti Airtel owes the government around US$4.97bn and Vodafone-Idea owes around US$7.40bn in AGR dues.

An analysis of GlobalData's Mobile Broadband Forecast Pack reveals that Vodafone-Idea will have 282.5 million subscribers with 23% market share by 2020 end. As AGR dues of Vodafone-Idea are highest, it is a mammoth task for the company to repay the dues without any support from the government. Moreover, payment of such hefty dues will impact the company's investments in future projects such as smart cities and 5G.

Antariksh Raut, Senior Research Analyst of Telecoms Market Data & Intelligence at GlobalData, says: "The payment of AGR dues will have least impact on Reliance Jio as the operator entered into the Indian market quite late in 2016. Bharti Airtel has some potential head-room to take on the burden of AGR dues considering its financials. However, Vodafone-Idea is in worst shape having cash and cash equivalents of US$1.75bn, as per December 2019 results, which is not at all sufficient enough to pay their statutory dues."

While the Finance Ministry is keen to work out relief measures for the sector, it is against providing any concession on payment of penalty as it may lead to a similar demand from other sectors. However, DoT later filed an application in the Supreme Court, requesting that telcos be allowed to spread the payment of AGR dues over 20 years or less, at a reduced interest rate of 8%. A decision on the same will be taken on next Supreme Court hearing which is currently on hold due to Covid-19 lockdown till 3rd May 2020.

Raut concludes: "The telecom sector plays an important role in the development of a nation, and in India, it is expected to contribute 8.2% of GDP by FY20 once 5G is functional. Also, futuristic projects such as smart cities are fairly dependant on the strength of the telecom sector. But the recent ruling on AGR dues has led financial burden on incumbent operators which may impact such projects. As a result, the government has to put in measures to provide some relief to the operators so that they do not enter into fresh debts."

ENDS

For more information

Analysts available for comment. Please contact the GlobalData Press Office:

EMEA & Americas: +44 (0)207 832 4399

Asia-Pacific: +91 40 6616 6809

Email: pr@globaldata.com

For expert analysis on developments in your industry, please connect with us on:

GlobalData | LinkedIn | Twitter

Notes to Editors:

Quotes provided by Antariksh Raut, Senior Research Analyst of Telecoms Market Data & Intelligence at GlobalData

This press release was written using data and information sourced from proprietary databases, primary and secondary research, and in-house analysis conducted by GlobalData's team of industry experts

About GlobalData

4,000 of the world's largest companies, including over 70% of FTSE 100 and 60% of Fortune 100 companies, make more timely and better business decisions thanks to GlobalData's unique data, expert analysis and innovative solutions, all in one platform. GlobalData's mission is to help our clients decode the future to be more successful and innovative across a range of industries, including the healthcare, consumer, retail, financial, technology and professional services sectors.

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(C) 2020 M2 COMMUNICATIONS, source M2 PressWIRE

Stocks mentioned in the article
ChangeLast1st jan.
BHARTI AIRTEL LIMITED -2.56% 580.95 End-of-day quote.14.07%
GLOBALDATA PLC 2.00% 1275 Delayed Quote.-8.42%
VODAFONE IDEA LIMITED -3.37% 12.9 Delayed Quote.25.35%
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