Tata Sons pegs AGR liabilities of two telecom firms at Rs 19,638 cr

Tata Teleservices, one of the first to start wireless telephony services in India, becomes cash burner for group

Tata Sons has pegged the gross liabilities of Tata Teleservices and its listed subsidiary, Tata Tele Maharashtra, at Rs 19,638 crore for what the companies owe to the government as adjusted gross revenue (AGR).

Tata Sons provisioned Rs 1,148 crore in Financial Year 2022 compared to Rs 8,090 crore in FY 2021 for the AGR dues of the two companies, the company said.

“The company has recognized a provision for [Rs] 1,148 crores during the year ended March 31, 2022 taking the total provision to Rs 19,638 crores,” the company said in its annual report. The amount has been recorded in compliance with the accounting standards, strictly without prejudice to TTSL, TTML and the company's legal rights, claims, remedies and contentions available under law," said Tata Sons, referring to Tata Tele Services Limited and Tata Tele Maharashtra.

Tata Teleservices, one of the first companies to start wireless telephony services in India, has become a cash burner for the steel-to hotels group. Tata Sons sold its consumer telephony business for free to Bharti Airtel, but it retained the liabilities of Tata Teleservices. Until June 2019, Tata Sons had infused Rs 46,595.05 crore in Tata Teleservices so that the subsidiary could repay its bank loans.

Tata Sons also bought back the 50 per cent stake of its joint venture partner, NTT Docomo, in Tata Tele for $1.2 billion in November 2017. The AGR liability is an additional financial burden on Tata Sons, as Tata Teleservices does not have enough cash flow to pay for the liability.

The Supreme Court, in October 2019, dismissed the appeals of Tata Tele and other telecom companies to allow the Department of Telecommunications (DoT) appeal in respect of the definition of AGR. Accordingly, on March 31, 2020, Tata Teleservices had provided Rs 7,976.60 crores for licence fees, interest, penalty, and interest on penalty.

In September 2020, the SC asked telecom companies to pay by March 31 the next year 10 per cent of the total dues as DoT had demanded from them. The balance was to be paid in installments--commencing April 1, 2021 up to March 31, 2031-- by March 31 every year. As directed by the Supreme Court, Tata Teleservices then furnished on September 28, 2020 an undertaking to the DoT to make the payment of arrears and made a payment of Rs 3,557.98 crore.

In January 2021, Tata Teleservices and Tata Tele Maharashtra filed a joint application for direction/clarification of SC’s previous order wherein they requested the court to allow them to seek rectification of computational errors and erroneous disallowances in the amounts claimed by the DoT. The court dismissed the application.

On August 22, 2021, the two companies filed a review petition against the Supreme Court’s orders dated July 23, 2021. On September 15, 2021, the Indian government approved moratorium/deferment of up to four years on annual payments of dues as per AGR Judgment and on dues related to payment of spectrum in past auctions, to provide relief by easing liquidity and cash flow for all the telecom companies.

The DoT gave an option to Tata Teleservices and Tata Tele Maharashtra, for the moratorium of the AGR-related dues and for the conversion of interest amount into equity. On October 29, 2021, TTL opted for the four-year moratorium on the AGR-related dues and on February 1, 2022, and conveyed that it is not agreeable to the conversion of interest into equity and is willing to pay the interest along with the AGR dues on the due dates as per the terms of the moratorium.