Impact of the New AGR Dues Norms on the Telecommunication Industry

Not long ago, the government’s persistence to extract long-standing AGR dues caused India’s telecom industry to be at a standstill. As every telecom company was in survival mode, no one could think about innovation at this stage. It wasn’t until the Supreme Court decided to put a 4-year moratorium on the demand that telecom companies finally had time to sit back, relax and contemplate.

The last three words feel more like wishful thinking rather than facts. Because even though the new norms about AGR did bring some relief to telecom companies, not everyone would survive.

In this article, we take a realistic look at the impact of the new norms on the telecommunication sector.

The Good Impact

First, let us talk about all the good this decision will bring. We all know that the outstanding demand for the license fee is huge – probably more than the GDP of many small nations. Therefore, we can safely say that the decision to put a stop to this demand, for the time being, has created the right impact.

1. Rise of more telecom companies: As the demand has subsided, for the time being, more telecom companies have a chance to come up. These new players are enthusiastic. They have been watching the big corporations from the sidelines – learning from their mistakes. Thus, they now have a chance to enter into this sector – making it better than before.
2. Away from survival and into Innovation: As the government started to turn the screws of outstanding demands on the telecom companies, most of them went into survival mode. With the new rules, these telecom entities now have a chance to evolve.
3. Reduction of the license fee: The Adjusted Gross Revenue’s definition and its inclusion in the calculation of the license fee created issues between DOT and the TSPs. But now, with the introduction of ApGR (Applied Gross Revenue), revenue generated from non-telecom activities have been removed from the occasion. Consequently, the license fee is now low.

The Bad Impact

Regardless of the intention of the decisions, some of their impacts are not that positive for the industry.

1. It came too late: The battle between the Department of Telecommunication and Telcos had been going on for years. During this time, some companies ceased to exist because they couldn’t bear the weight of these demands. No one talks about them anymore because they didn’t have the chance to push themselves. If only the decision had come earlier, we would have had more options for telecom companies.
2. It was too little: Many experts say that the relief is too little. While excluding non-telecom revenue from the AGR is appreciated, the amount that comes out is still high. As per them, small telecom companies should have been given a wider berth in this matter. Simply put, the government must have given them more relaxation. 

The Indifferent impact

Many telecom companies, especially those already spread across the whole country – have an indifferent response to the AGR. It became evident after Reliance Jio came and said that they are relinquishing their right to use the four-year moratorium. Of course, it was expected for such a large company.

Moreover, in the case of Vodafone-Jio, the one company that truly struggled to gripe with AGR Telecom dues, soon got help from the government of India, which now owns 35.8 % of the company’s stakes.

One can say that the established players in the telecom sector – one that is defining this generation of telecom services – are more or less indifferent about the new changes.

Conclusion

The change in AGR Return Filing norms brought about many changes for the telecom industry and not all of them for the better. While we can’t ignore the positive changes, we can’t look past that these norms came too late. However, these changes make us hopeful for the future of the telecom industry, as while the small telecom companies have been forgotten, the up and comers can carve their niche because of these relaxations.

Author: Dushyant Sharma

Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.