TDSAT ruling to cut telcos’ licence outgo

The Telecom Disputes Settlement And Appellate Tribunal (TDSAT) on Thursday ruled that income from dividend, interest income on savings, capital gains and gains from foreign exchange should not be part of adjusted gross revenue (AGR) for paying revenue share or licence fee to the government.

So far, all these components were included as part of revenue share. The telecom industry has welcomed these developments and the body representing CDMA operators said it would ask for a refund of the revenue collected under the exempted heads.

At the same time, TDSAT has held that income earned by cellular operators from property rent, sale or lease of telecom towers, dark fibre line should be included in their AGR. CDMA operators were in for disappointment as the tribunal ruled that handsets given to subscribers bundled with their services would be included as part of the AGR for the purpose of licence fee.

All operators pay certain percentage of their AGR or their total revenues towards various licences. For instance, telcos currently pay between 6-10% of their total revenues as licence fees, 2-6% as spectrum fee, 12% as service tax and 2% as education cess. CDMA operators were in for disappointment as the tribunal ruled that handsets given to subscribers bundled with their services would be included as part of the AGR for the purpose of licence fee.

The tribunal also exempted earnings by telecom companies from management consultancy and training from AGR.

Justifying the move, the TDSAT said that since these activities did not require a licence, ‘any party could undertake these services and the revenue which is generated arises from personal efforts of the provider’. It also excluded bad debts, waivers and discounts given to their customers from the AGR list. “Bad debts, waivers or discounts are actual monies lost by the service providers. Allowing amounts on account of such losses to be included in AGR would mean that while the party incurs loss it has to pay licence fee on the loss also,” it said.

AUSPI secretary general SC Khanna said that the association would ask the department of telecom (DoT) to refund excess revenues collected from operators under these heads. “AUSPI was the first petitioner on the definition of AGR. The TDSAT has passed the right ruling — we welcome judgement its ruling,” he said.

Similarly, the Cellular Operators Association of India director general TV Ramachandran said that the judgement was very fair and progressive as it upheld the industry’s views that various non-telecom licence related revenues should not be considered for AGR calculation. “This is a milestone for the industry and it is good for the sector’s growth. This has been our long standing demand and it has now been addressed,” he said.

Operators also welcomed the TDSAT’s move to reject Trai’s demand that recommendations be implemented from a prospective date. Instead, the tribunal said that the order would be effective on telecom operators only from the date of appeal before it.

“There is no reasonable basis to make this order effective from a prospective date. The respondent (government) should not reap the benefit of the time lag in completing the legal process,” the tribunal added.