In what comes as relief for India’s embattled telecom operators, the High Court of Tripura has ruled that the Centre cannot collect licence fees on revenue generated from non-telecom activities.
The court has also asked the Department of Telecom (DoT) to undertake a fresh exercise to determine the definition of ‘non-telecom’ activities.
The ruling could have major ramifications for the industry, which has been fighting this case in various legal arena for over 15 years.
According to industry estimates, telecom operators stand to save nearly Rs 30,000 crore if the High Court ruling is implemented.
Currently, telecom operators are required to pay the Centre 8 per cent of their annual revenues — technically called adjusted gross revenues (AGR). However, what constitutes AGR has been a matter of dispute.
While DoT is of the view that all revenue earned by the operator should be taken into account while calculating the licence fee, operators have been arguing that income from non-telecom activities like sale of handsets, interest earned from fixed deposits and sale of company assets should not be included under the definition of AGR.
Ruling in favour of an appeal filed by Bharti Airtel before the Tripura High Court, Justice S Talapatra said, “The definition of ‘gross revenue’ shall not include the revenue from the activities unrelated to the license of the licensee-company.”
Telecom industry representatives said that though the court ruling is a step in the right direction, they were cautious about the final outcome.
“Despite the ruling, there are still uncertainties on how this will influence the policy maker. The issue of AGR is already before the Supreme Court; so DoT could easily challenge the Tripura court order in the apex court and seek a stay,” said an industry representative.
A Mumbai-based operator said that the Tripura court was yet to define what constituted telecom activities. “The court has left it to the Centre to review the existing rules and seek (telecom regulator) TRAI’s recommendations. Finally, DoT could very well stick to its guns,” said the operator.
The long story
The decision to charge a licence fee as a share of revenue — instead of an upfront fee — was part of the migration package offered to telecom operators under the New Telecom Policy 1999.
But then, the question arose as to what constitutes revenues from telecom services. In 2006, telecom tribunal TDSAT ruled in favour of the operators, stating that the DoT cannot demand a share of revenue as licence fees derived from activities that do not require a licence.
DoT challenged this in the Supreme Court, which initially dismissed the plea, but later, in 2007, overturned the TDSAT ruling.
The apex court, however, allowed the operators to question the computation of AGR. The operators then filed several petitions in various high courts challenging DoT’s computation method.
The telecom regulator, meanwhile, came up with a compromise formula in 2015, accepting the operators’ demands partially by excluding components such as income from interest and dividends.
The ball is now in DoT’s court. – The Hindu Business Line