Telecom industry to initiate talks for a new and micro version of AGR

The telecom industry will propose to the government that revenue from payments banks, rental
income, and e-commerce operations be excluded from calculations of adjusted gross revenue (AGR).
Telecom operators are required to pay a certain percentage of their AGR as an annual license fee to the
government, making the definition of what constitutes AGR critical for their profitability.

The Cellular Operators Association of India (COAI), which represents telecom service providers, is
holding consultations with all the operators, including Reliance Jio Infocomm Ltd, Bharti Airtel Ltd, and Vodafone Idea Ltd, to arrive at a definition.

“A macro definition is in place, but a micro definition of AGR is in the works to identify the non-telecom
revenue, which will go into the more granular details,” S.P. Kochhar, Director General of COAI said in an interview. The discussions involve preparing a clear segregation of components which will be part of the
elements that make up telecom revenue.

“The idea is to reduce as many disputes as possible, to specify components like revenue from payments
bank, rental income and e-commerce platforms to be excluded from AGR. This in turn will reduce levies
and liabilities for the telcos and open up newer fields for business,” he added.

The industry intends to share its recommendations with the telecom department by the month-end.
The changes will be incorporated into the notification that amended the AGR definition from 1 October,
eliminating the need for the government to issue a separate amendment to the unified license
agreement, which binds telecom operators to a revenue sharing arrangement with the government.

License fees and spectrum usage charges (SUC) are paid on the basis of AGR. A lower AGR will mean
reduced levies and improved profitability of telcos. SUC, however, has been abolished on future
purchases of airwaves from auctions. The October notification that changed the definition of AGR
introduced the concept of applicable gross revenue (ApGR), excluding all non-telecom revenue from
gross revenue earned by the telecom firms.

The notification specified that gains from forex fluctuations, insurance claims, capital gains on account
of sale of fixed assets and securities, receipts from Universal Service Obligation Fund, bad debts recovered, excess provisions written back, revenue from activities under the information and
broadcasting licence and revenue from operations other than telecom activities will now be excluded
from gross revenue to arrive at the ApGR.

Differences over the definition of AGR led to a decade-long legal battle between the government and
the telecom companies. In 2019, the Supreme Court ruled in favor of the government, permitting it to
include all non-telecom revenue in calculating AGR.

While the telcos are bound by the apex court’s order to make payments for outstanding AGR-related
dues amounting to more than ₹1.9 trillion over the next several years, the amended definition as part of
the rescue package for the industry applies prospectively.