Analysts estimate 1-1.5% EBITDA rise from Q3FY22 after new AGR Definition

According to analysts, after the DoT introduced the new AGR definition, the telcos will see an EBITDA rise of up to 1.5% come Q3 of the current fiscal.

More Relief for Telcos

Since 2005, the AGR and its definition has been a bone of contention between the telcos and the government. However, the DoT had won the case in September 2019, allowing it to collect AGR dues based on every bit of revenue a telco makes. This move, however, left the telcos looking at lakhs of crores in AGR dues. Per the data put out by telcos in June, Airtel and Vi have an AGR obligation in excess of Rs. 1 trillion combined.

The new definition, called the Applicable Gross Revenue, or ApGR, will only take into account the income earned through telecom activities. Incidentally, it will also exclude the roaming revenue that telcos earn off each other.

Analysts have estimated the sort of financial respite the telcos may look forward to.

According to IIFL Securities, telcos can look forward to significant improvements in EBITDA. According to the firm, Vodafone Idea, Bharti Airtel and Reliance Jio can gain Rs. 60 crore, Rs. 90 crore and Rs. 100 crore earnings come Q3; this translates to 1.5%, 0.8% and 1% EBITDA gains, respectively.

The reason why the numbers seem underwhelming is because the non-telecom revenue makes up 5-10% of total revenue of a telco on average.

Per the telcos' reported financial situation, Jio seems to be in the strongest position. Its EBITDA and EBITDA margin stood at Rs 8,989 crore and 48% respectively in the Q2; Airtel and Vi have not reported their numbers for the second quarter yet. However, Vi will see the most savings among the three telcos after this amendment; since the telco has the smallest user base, it will see the most cash flow gains.

The DoT had scrapped the SUC as well, for future spectrum auctions; this means that when the telcos buy more spectrum, their savings will improve further. This is because AGR takes the SUC into account as well, and an absence of SUC will automatically mean lower AGR.

The move comes under the telecom relief package, a set of relief measures for the telecom sector. Announced on 15th September, the package serves as a base for telecom reforms, which are expected to continue in the future.