In a landmark ruling, the Supreme Court of India rejected curative petitions filed by major telecom players, including Vodafone Idea and Bharti Airtel, concerning their dues related to Adjusted Gross Revenue (AGR). The judgment upheld the 2019 ruling, imposing massive financial obligations on these companies.
Shimpy Arman Sharma, Partner at Anand Sharma & Associates, expressed concern, stating, “The Telecom Companies are already on the verge of a financial crisis, which threatens their very existence, and the judgment passed by this Hon’ble Court, prohibiting even the correction of clerical and arithmetical errors in the demands, foreclosing any reduction of the amount payable by thousands of crores of rupees and further imposing a penalty and interest on penalty, is highly unjust.”
There is virtually no option left for the Telecom Companies as another legal battle will bear penal charges by not paying the same well within time.Shimpy Arman Sharma, Partner at Anand Sharma & Associates
The financial ramifications are severe, particularly for Vodafone Idea. Following the ruling, the company’s shares fell by 21%, reflecting investor concerns over its growing liabilities, which now total ₹2.03 trillion. Vodafone’s massive AGR dues, amounting to ₹70,320 crore, will challenge the company’s ability to stay competitive in an already strained market.
The decision reinforces the government’s stance on revenue sharing from both telecom and non-telecom activities, which could lead to further financial distress for cash-strapped companies in the sector. Overall, the Supreme Court’s decision has far-reaching consequences for the Indian telecom industry, and its impact will be felt for years to come.Sandeep Bajaj, Advocate, Supreme Court of India
Alay Razvi, Partner at Accord Juris, added that Vodafone Idea, already financially strained, will face more pressure, while Bharti Airtel will see a hit to its profitability.
The decision to reject the curative plea on AGR dues from Vodafone Idea and Bharti Airtel will put a lot of financial stress on both the companies. Vodafone Idea has already been burden with financial loss and are making efforts to overcome the loss. On the other hand, Bharti Airtel will take a financial hit and shall impact their expansion and profitably.Alay Razvi, Partner, Accord Juris
The heart of the dispute lies in the definition of AGR, a point of contention for over two decades.
The core of the dispute revolves around the definition of AGR, as outlined in clause 19.1 of the license agreement between the Government of India (GOI) and TSPs. Under this agreement, TSPs must pay 8% of their AGR as a license fee and an additional 3-5% as spectrum usage fees.Suvigya Awasthy, Partner, PSL Advocates and Solicitors
Financial strategists, including Rohan Taneja of Kred Jure, emphasized that with the dismissal of the curative petitions, there is no further legal recourse available.
Curative is the last step to assail a judgment passed by the Supreme Court, there is no further remedy permissible under the law for the Telecom companies to challenge the direction to pay the dues.Rohan Taneja, Senior Associate, Kred Jure
Vodafone Idea is facing debt repayment starting FY 2026, with cash flow projected to remain negative until FY 2031, further stressing the market.
Aditya Chopra, Managing Partner at Victoriam Legalis, emphasized, “It is unlikely that the telecom sector will avoid an impact after the recent order passed by the Hon’ble Supreme Court, rejecting the application for listing of curative petitions filed in connection with matters concerning Vodafone Idea’s AGR dues.” Chopra added that the court’s decision not to allow revaluation of AGR dues means the companies must bear the full financial burden imposed over the last ten years.
In light of these recent developments, financial strategists have reported that Vodafone Idea’s debt repayment obligations will begin in FY 2026, and the burden of negative cash flow is projected to persist until FY 2031. This could potentially alter the market dynamics and market share distribution in the telecom industry. It will be interesting to observe the reaction of investors, the next strategic moves by Vodafone Idea’s competitors, and the company’s financial health in the coming period.Aditya Chopra, Managing Partner, Victoriam Legalis
The Supreme Court’s decision has far-reaching consequences.
This comes as a major setback for the telecom companies as majority of them are heavily debt-ridden. Various telcos are already undergoing insolvency, a fact noted by the Supreme Court in its judgment in September, 2020. It remains to be seen how the AGR dues will be treated under IBC and whether the telecom companies can sell spectrum, as this question is currently pending before the Supreme Court.Raunak Dhillon, Partner, Cyril Amarchand Mangaldas
The telecom sector’s future now hinges on possible government intervention or strategic restructuring. As Saurav Agrawal, Advocate at the Delhi High Court, noted, “It is now up to the Telcos to interface with the Government for a relief package.”
With the Supreme Court rejecting the Telco’s Curative Petitions for not meeting the established legal parameters, the Telcos have to now fully comply with the AGR judgement in letter and spirit, including payment of interest and penalty imposed by the Telcom Department and upheld by the Hon’ble Court.Saurav Agrawal, Advocate, Delhi High Court
In 2019, the DoT’s broader AGR definition added significant liabilities for telecom companies, a decision reaffirmed by the court in 2020.
The October 2019 ruling had upheld the DoT’s broader AGR definition, adding a Rs. 92,000 crore liability. The telecoms’ review petitions were dismissed in January 2020, followed by the Court’s September 2020 order granting them 10 years to pay, with 10% due annually by March 31. Despite telecom companies’ claims of errors in the AGR demand, their curative petitions were rejected on August 30, 2023.Aslam Ahmed, Partner, Singhania & Co.
With mounting debts and legal constraints, industry players are facing a severe financial dilemma, and the government’s next move will play a pivotal role in shaping the future of Indian telecom.
