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India’s Supreme Court (SC) has slammed telcos over spectrum sales at the latest adjusted gross revenue (AGR) hearing

It has been almost a year since the SC passed its divisive AGR judgement, ordering the nation’s telcos to pay billions of dollars to the Department of Telecommunications (DoT). Since that time, Vodafone Idea has teetered on the edge of insolvency and Bharti Airtel has taken desperate measures to remain competitive, leaving only the nation’s disruptive newcomer, Reliance Jio, comparatively unscathed. 
 
These telcos are currently seeking around 15 years to pay back the incredibly large fees, with the DoT itself arguing that 20 years is a more realistic deadline.
 
However, much of the debate held at Friday’s Court hearing revolved around some of the nation’s smaller telcos, which have entered bankruptcy during the period over which the AGR dues were accrued. These telcos, including Rcom, Videocon, and Aircel, have since sold their spectrum to their larger rivals as part of the insolvency process, but the SC has questioned the legality of such a sale and suggested that the process should transfer the AGR liabilities to the buyer.
 
The Justices held that spectrum is ultimately leased from the government and is not the telcos’ to sell.
 
“How can you sell somebody else’s property? This will allow for dues to be wiped out – a new party will take over free of all encumbrances and liabilities,” said Justice Arun Mishra. “The wiping out of the government dues in this fashion is not permissible.”
 
If such a ruling is upheld, both Reliance Jio and Bharti Airtel would be hit hard by the transfer of these debts, which amount to over a billion dollars.
 
Lawyers representing the telcos said that, if the SC wants to recoup the AGR dues, then treating spectrum as one of a telco’s assets was crucial.
 
“If spectrum sale is not allowed, it [the spectrum] will be returned to the DoT, auctioned for future use, and this would not help recover the AGR dues," said lawyer Harish Salve, representing both Rcom and Reliance Jio.
 
Similarly, Bharti Airtel’s lawyer, Kapil Sibal, argued that without ownership of the spectrum, telcos would be far less likely to be able to secure bank loans.
 
“Spectrum is the most valuable asset with telcos taken as security by lenders. If the SC refuses to recognise the sale of spectrum, banks will stop lending to telcos, and this will grievously hurt the telecom sector," he argued. 
 
So, who truly owns the spectrum – the government or the telcos? 
 
The SC has directed the DoT to submit affidavit of details of spectrum sharing and licence trading agreements of the telcos ahead of the final judgement, which is expected to arrive sometime before the start of September, which is when Justice Mishra is due to retire.
 
 
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