The Indian telecom department’s latest note on adjusted gross revenue computation is expected to provide relief to legacy telecom players like Bharti Airtel and Vodafone Idea, who owe the government 260 billion rupees (US$3.4 billion) and 503 billion rupees respectively.
The department has removed several non-telecom income sources such as property rents, dividends and interest while considering adjusted gross revenue, the Economic Times reported.
The new norm will be applicable from October 1 and is expected to reduce the stress in the telecom sector as it will reduce telecom companies’ future payment obligations. Market analysts say that non-core revenue constitutes nearly 10% of the total revenue of telecom companies.
In the note, the department introduced the concept of applicable gross revenue, which will not include the non-telecom revenue earned by telecom companies. The exempt items also include gains from forex fluctuations, insurance claims, capital gains on account of sale of fixed assets and securities, bad debts recovered and revenue from operations other than telecom activities.
Since license fees and spectrum usage charges are paid on the basis of adjusted gross revenue, the telecom companies now need to pay a much lesser amount than before. This will help telecom companies improve their finances.
The new definition is part of the government’s relief package announced for the telecom sector, which is facing a heavy debt concern. Of the three private players – Reliance Jio, Bharti Airtel and Vodafone Idea – market analysts doubt the future of Vodafone Idea as a going concern.
The government and telecom companies have been locked in a long legal battle over adjusted gross revenue. The Supreme Court in 2019 ruled in favor of the telecom department, which had contended that revenue from all streams, including those from non-core items, should be considered.
The worst hit was Vodafone Idea, whose adjusted gross revenue dues stood at 582 billion rupees, followed by Bharti Airtel (440 billion rupees). As part of the government’s relief package, it announced a moratorium of four years for making payments toward revenue dues, and both Vodafone Idea and Bharti Airtel have availed it.