Sunil Bharti Mittal, the founder of Bharti Enterprises. Photo: AFP

Having exhausted all their legal options, mobile-phone companies in India are scrambling to pay huge dues – for adjusted gross revenue, as ordered by the country’s highest court.

The Telecommunications Department will issue fresh notices to Vodafone Idea, Bharti Airtel and Tata Teleservices this week for not paying their entire dues.

Bharti Airtel paid 100 billion rupees on Monday, but it owed around 356 billion rupees (US$4.95 billion), a total figure that includes license fees, spectrum usage charges, interest and penalty dues to the department.

Vodafone Idea made two payments on Monday and Thursday, totalling 35 billion rupees, but it owes nearly 530 billion rupees ($7.45 billion) all up under the new revenue computation norms.

A ruling by the Supreme Court late last year widened the scope of adjusted gross revenue to include income from non-core items. The dispute arose when telecom companies migrated to a new system offered by the government in 1999, under which operators agreed to share a certain percentage of revenue with the government.

This legal case dragged on for 14 years, with operators arguing that the revenue should be made up of income from telecom services. But the Department of Telecommunications said it should include all revenue earned by an operator, including non-core telecom operations. The court delivered its judgment last October in favor of the department.

Meanwhile, the now-defunct Tata Teleservices, which claimed it paid 22 billion rupees as ‘full and final payment’ on adjusted gross revenue dues on Monday. But the telecom department plans to issue a separate notice. It argues that the total dues owed by Tata is 140 billion rupees and that the amount the group paid was only the principal, and that interest and penalty fees are still owed.

The telecom department is also awaiting legal advice on adjusted gross revenue and whether it can invoke bank guarantees in the case of defaults.

Meanwhile, Bharti Airtel chairman Sunil Bharti Mittal met Telecom Minister Ravi Shankar Prasad on Thursday and assured the government that his company would comply with the Supreme Court order and pay its revenue dues before March 17, the date of the court’s next hearing. Mittal said Airtel was committed to “complying with the Supreme Court order on AGR dues” and asserted that the company would make balance payment “expeditiously”.

He described the payout demand as an unprecedented crisis for the industry and called for the government to cut taxes and levies for the sector.

Mittal and Vodafone Idea chairman Kumar Mangalam Birla met Finance Minister Nirmala Sitharaman on Wednesday. Vodafone Idea had warned earlier that it might not remain as a going concern unless the government offered some relief on revenue dues, implying that it might shut down or undergo bankruptcy proceedings.

Future shock

Industry observers have said revenue dues owed by telecom companies – currently pegged at 1.64 trillion ($22.8 billion) – may go up by 40% if the telecom department also demands dues for 2018 and 2019.

They said that adjusted gross revenue dues of 926 billion rupees ($12.87 billion) sought by the telecom department in the Supreme Court was a sum only calculated up till 2017. A further 708 billion rupees ($9.84 billion) is reportedly owed up to January 2020.

This could further widen the gap between government estimates and self-assessments by telcos – and lead to further litigation.

The government is trying to provide some relief to telecom companies to ensure that the sector will continue to have three private sector companies. It is trying to strike a balance with companies complying to the top court’s order, the health of the telecom sector, and customer interests.

If Vodafone Idea collapsed, it would cause significant job losses and have an impact across a range of sectors and the wider economy. The global perception of India as an investment decision would also take a beating.