AGR Issue: Operator Payment Options
This purpose of this note is to analyse the impact on Bharti and VodafoneIdea in case DoT was to collect its demand (excess payment on license fees) in yearly instalments of various durations.
DoT's Demand
The embedded link has DoT's Demand calculated as on 5th July 2019. This is based on the affidavit they had submitted in the supreme court. This demand is likely to increase by approximately 50% on account of additional spectrum charge that is now absent in this demand.
Yearly Installments (LF)
The following table list the yearly instalments that the Bharti and VodafoneIdea have to pay for various tenure for the extra license fees alone. This also measures the impact by comparing this outflow with their existing spectrum auction deferred payments.
The formula used for calculation of the instalments is embedded in my earlier note titled "Deferred Payment Calculation Formula". Note for a 10-year tenure, the outflow on account of LF only is 45% for Bharti and 37% for VodafoneIdea when compared with their existing auction deferred payments. Also, the interest rate has been assumed as 9.5%.
Yearly Installments (LF+SF)
The following table list the yearly instalments that the Bharti and VodafoneIdea have to pay for various tenure for the extra license and spectrum fees.
See with the addition of the spectrum usage charge (assumed 50% of the original demand), the outflow for the ten year period is 67% and 55% for Bharti and VodafoneIdea respectively when compared with their existing auction deferred payments.
Conclusion
With such outflows in place, unless the subscriber revenues increase proportionately, India will never be able to hold any spectrum auctions in the near future, If they do so, then it will significantly disturb the competitive dynamics of the market and diminish consumer's leverage of the choice of telecom services. This will also mean poor quality telecom services as the networks will continue to get choked with a steady increase in 4G subscribers and usage.
(Views expressed are of my own and do not reflect that of my employer)
PS: Find the list of other relevant articles in the embedded link.
歐陽詝 ? Barcelona School of Economics
5 年Good day, Parag Kar. I am a TMT analyst and I am interested in writing an article about India's AGR crisis. I came across your table highlighting the outstanding fees to be paid by each operator:?https://paragkar.com/dot-lf-demand/ I would like to play with the exact numbers, so would you mind directing me to the source materials of the figures in the table? Your help is greatly appreciated.
In search of new job prospects
5 年Good morning
Sr. Executive Store ( Rusan Pharma Ltd ) Dehradun, India
5 年Excellent
Head - Policy & Strategy,Apple Ex-AT&T,Tatas,Reliance
5 年Deferring will not mean not charging interest and penalty. As if it is done it will technically constitute a waiver