The burden of paying AGR (adjusted gross revenues) dues of Videocon Telecommunications Ltd may fall on Bharti Airtel, if one were to go by the proceedings at the Supreme Court on Friday. The court observed that Airtel, which under a trading pact with the bankrupt company, is using the spectrum given to it, will have to the pay the AGR dues of the telco undergoing insolvency proceedings.
The three-judge bench, headed by Justice Arun Mishra, said the spectrum trading guidelines mandate clearance of past dues before the transfer of the radio airwaves to a new buyer under the Insolvency and Bankruptcy Code (IBC). If the bankrupt company that holds the spectrum does not pay the AGR dues, its user clears the dues, the court said.
Videocon has sold its access spectrum in the 1800 megahertz band to Airtel, which itself owes ₹43,980 crore in AGR dues. Airtel had also bought the airwaves held by another bankrupt telco Aircel Group. While Aircel owes ₹12,289 crore in AGR dues, Videocon has a liability of ₹1,376 crore. If the apex court directs the telcos using spectrum of bankrupt companies to pay the past dues, then both Airtel and rival Reliance Jio Infocomm Ltd will be hit hard.
Reliance Jio has been using bankrupt Reliance Communications Ltd’s (RCom) spectrum under a sharing agreement since 2016, the launch year of India’s largest mobile operator. RCom owes ₹25,199 crore, including spectrum usage charges and licence fees.
Senior lawyers Harish Salve, representing both Reliance Jio and financial creditors of RCom, and Kapil Sibal, for Airtel, said the companies have not received any notice from the department of telecommunications (DoT) on additional AGR dues to be paid for using the spectrums of bankrupt telcos.
Both Salve and Sibal said the right to use spectrum is an asset of a telecom operator and, thus, used by banks as security to disburse loans to such companies. Interestingly, Salve said that the government will not be able to recover its AGR dues from bankrupt telcos if the sale of spectrum is not allowed under insolvency resolution process.
“SC is holding that spectrum cannot be sold, this will not help recover the AGR dues. If spectrum sale is not allowed, it will be returned to the DoT, auctioned for future use, and this would not help recover the AGR dues," Salve said, while arguing for lenders to RCom.
Sibal highlighted that not treating spectrum as an asset of a telecom company may not bode well for telcos as it may affect lending by banks. “Spectrum is the most valuable asset with telcos taken as security by lenders. If the SC refuses to recognise the sale of spectrum, banks will stop lending to telcos, and this will grievously hurt the telecom sector," he added.
The Supreme Court directed the DoT secretary to file an affidavit detailing dues that are to be paid by users under spectrum sharing agreement. The court also asked the government to submit details on past dues, dates of grant and transfer of spectrum licenses. The court will hear the matter next on Monday.
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