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What Is AGR And Why Is It Bad For Vodafone-Idea And Airtel

Priyanka Dua

Despite the fact that there are billions of customers who are using mobile phones in India, the telecom operators are not in good shape. Both Airtel and Vodafone-Idea are struggling with a lot of stress, due to massive losses in the second quarter of this financial year.

Ever since Reliance Jio has launched its services, other operators are facing a lot of problems with their finances. The operators have launched many plans to give a tough fight to Jio. But somehow they are unable to do that, and now the former has become the number one telecom operator in India.

When companies started getting some revenue, the Supreme Court has ruled in favor of the Department of Telecom and asked operators to pay the average gross revenue (AGR) tax. Now, the question arises here is what exactly AGR is. So today, we will let you know everything about the whole issue.

What exactly is AGR?

This issue is not new to the ministry or the operators. This issue started in 2005 when the ministry wanted operators to pay AGR on non-core telecom operations like interests on deposits and assets sale.

However, operators said that they will pay AGR only on the revenues they get from their services. On October 24, the Supreme Court asked companies to pay 1.47 trillion in three months. The telcos have filed two review petitions, and the first one was dismissed by the apex court. Meanwhile, Reliance Jio has paid its AGR dues to the ministry till January 31st. So, this might increase the trouble.

How this decision will affect the Airtel and Vodafone-Idea?

Both telecom operators have reported a massive loss in Q2 of the current financial year. Together they have lost Rs. 74,000 crore in Q2, which is the highest loss in the corporate industry. Now, Airtel has to pay Rs. 35,500 crore to the DOT, whereas Vodafone-Idea has to pay Rs. 53,000 crores to the ministry.

So, now you can imagine how much pressure they are in. In fact, Vodafone has cleared its stand that they will shut their shop if the government doesn't offer any bailout package to them. But even if they'll get a relief package from the government, they are unlikely to sustain in the market for a longer period.

What If Vodafone-Idea Exit?

It is worth mentioning that even if Vodafone-Idea left the country, then this will give a wrong message to other investors planning to come to India. So, there are high chances that the government will come up with some major measures to improve the condition of the operators.

In case, if the operator left the country then its users will be asked to migrate to other operators like BSNL, Airtel, and Reliance Jio. Then, there will be only two private players and that will be not good for BSNL and MTNL.

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