Vodafone Idea share price surged nearly 10% in the intraday trade today, after the Supreme Court permitted the Central government to reconsider the issue of reassessing the company’s adjusted gross revenue (AGR) dues.
The apex court’s decision is seen as a key breather for the debt-ridden telecom operator, which has been struggling under the burden of massive AGR liabilities for years.
What triggered the rally?
The Supreme Court observed that the AGR matter falls within the Centre’s policy domain, giving the government the freedom to relook into Vodafone Idea’s request for reassessment.
The court made it clear that there is “no impediment” to the Union government taking an appropriate decision in the case.
For Vodafone Idea, this development opens the door for a possible reduction in dues.
What is the case about
Before going to the case, in simple terms, AGR (Adjusted Gross Revenue) is a key metric used to calculate the licence fees and spectrum usage charges that telecom companies pay to the government.
Disputes over its calculation date back almost two decades.
Vodafone Idea has been contesting the Department of Telecommunications (DoT) demand for an additional Rs 5,606 crore in AGR dues for the period up to FY2016–17.
Furthermore, the company has argued that these assessments are incorrect and need to be revisited.
The matter was earlier adjourned multiple times as both the government and the company sought time to explore a resolution.
Why this matters for Vodafone Idea
For Vodafone Idea, which is already saddled with high debt and intense competition, any relief on the AGR front could be a major turning point.
Currently, around 50% stake is held by the government in the telecom operator. This makes it a direct stakeholder in the company’s survival and revival.
A potential reassessment of dues could ease the company’s financial strain, and provide room for network expansion and tariff competitiveness against rivals Reliance Jio and Bharti Airtel.
AGR saga
The AGR saga dates back to October 2019, when the Supreme Court ruled that telecom companies must pay dues based on total revenue including non-core income.
However, the court later allowed repayment over 10 years.
The court directed operators to clear 10% of the dues by March 2021. Thereafter, the rest in annual installments till March 2031.
Along with others, Vodafone Idea had sought a review of this judgment. Meanwhile in 2021, the court refused to reopen the matter.
