InvestorQ : What is the major issue about telecom companies like Vodafone and Bharti Airtel paying nearly Rs.92,000 crore to the DOT as compensation?
Juvina Maggie made post

What is the major issue about telecom companies like Vodafone and Bharti Airtel paying nearly Rs.92,000 crore to the DOT as compensation?

Answer
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Angel dcosta answered.
10 months ago


This judgement came last week but the case has been going on for years. Earlier this week, the Supreme Court authorized the government to collect unpaid AGC charges and other levies to the tune of Rs.92,000 crore. Most of these payments had to do with an old dispute between the DOT and the telecom companies. The dispute pertained to whether the government was entitled to a share of the non-core revenues or only the core revenues. The SC order puts that debate to rest. Telecoms need to give the government a share of their non-core revenues along with the penal amount and interest, which is what amounts to Rs.92,000 crore.

Supreme Court has its heart in the right place

The lobbying body of telecom services providers, COAI, has objected to the order on the ground that it would put immense pressure on the financials of the telcos. More so, at a time when the telcos are already under pressure post the price war launched by Jio. Both Vodafone and Bharti Airtel have seen their ARPUs fall by more than Rs.50 in the last 3 years since Jio was launched. But that is off the point and the question is whether this represents a genuine liability or not. The core versus non-core revenue debate was a figment of the imagination of some lawyers and never really had a firm grounding in proper interpretation. If you look at the last 15 years, Bharti Airtel managed to increase its market cap 30-fold and its debt also 30-fold. Profits are almost where they were 15 years ago. That essentially implies that the Indian telcos have managed to expand their market cap by holding government payouts and binging on debt.