Ravi Gandhi, Bharti Airtel’s chief regulatory officer, stepped down from his position, according to a report published by Economic Times on January 23. Bharti Airtel confirmed this development to MediaNama but refused to make further comments. The move comes at a time when the company is expected to pay the telecom department over Rs 35,000 crore in Adjusted Gross Revenue (AGR) related dues.
As per the Economic Times, Gandhi is currently serving his notice period and will leave in early March. Prior to his role with Airtel, he had served positions in Reliance Communications as well as the government.
Airtel in troubled waters
Last week, Airtel had expressed their disappointment with the Supreme Court’s dismissal of review petitions filed by telcos including Vodafone Idea and Bharti Airtel, which sought relief from the apex court’s earlier judgement on the payment of adjusted gross revenue (AGR). Airtel told MediaNama that it was evaluating filing a curative petition against the apex court’s decision.
The company had posted a huge loss of Rs 23,045 crore in Q2FY20, and had said that the apex court’s AGR verdict had “significant financial implications on the company”. Without the SC verdict, Airtel’s loss for Q2FY20 would have been Rs 1,123 crore.
- It is, however, worth mentioning that earlier this year, shareholders of Bharti Airtel gave it the green light to raise up to Rs 21,000 crore, which will help the company in paying outstanding dues.
SC’s AGR verdict: On October 24, 2019, the Supreme Court had ordered telecom companies to include non-core income for calculation of Adjusted Gross Revenue (AGR), and asked them to pay Rs 92,640 crore to the Centre, which includes disputed demand, interest, and penalty. Following the judgement, the Cellular Operators Association of India (COAI) had written to the Department of Telecommunications, seeking its intervention, and argued that such payments would lead to a crisis at the companies and would cause distress to the sector as a whole.
India’s dwindling telecom sector
Telecom sector in Indian has been under tremendous financial stress.The Department of Telecom, in a notification, in October 2019, made note of the following points regarding the financial performance of telecom service providers:
- The aggregate gross revenue of the industry for the period between 2017-2018 and 2018-2019 has decreased.
- The price of data for the customer at an average of Rs 8 per GB is the lowest in the world.
- The average revenue per user (ARPU) per month has declined from Rs 174 in 2014-2015 to Rs 113 in 2018-2019.
DoT also formed a Committee of Secretaries (CoS) headed by the Cabinet Secretary Rajiv Gauba, to examine challenges faced by the telecom sector and suggest measures to mitigate the financial stress in the sector.
In August 2019, Communications Minister Minister RS Prasad had urged Finance Minister, Nirmala Sitharaman, to reduce the GST on telecom equipment, “first to 12% and then lower, from the current 18%”.
- Prasad noted that the adjusted gross revenue (AGR) of the telecom sector had shrunk by 25% to Rs 1.39 lakh crore in FY19 from Rs 1.85 lakh crore in FY17, and these measures were essential for the viability of the sector.
- He also wrote that the Rs 36,000 crore that has accumulated as input tax credit due to the telecom companies be adjusted against future GST levies.