40,000 jobs may be axed in Indian telecom sector

Telecom companies may have to shrink their workforces to be able to pay about Rs 92,600 crore to the Department of Telecom as part of AGR.

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The Supreme Court (SC) has asked the telecom companies, such as Airtel and Vodafone Idea to pay up about Rs 92,461 crore to the department of telecom (DoT) as part of the adjusted gross revenues (AGR). This may result in job cuts in the sector, that will render close to 40,000 people jobless.

The AGR dispute, which has been going on for about 16 years now, between DoT and the telecom companies is all about what AGR encompasses. As per DoT, AGR should encompass interest income, dividend, insurance claim, profits generated from sale of assets, forex gains, and many other components. On the other hand, the telecom companies were against including these components in AGR. The SC, however, has ruled in support of DoT.

The ruling spells a financial crisis for the telecom companies, which are already struggling to survive due to the tariff wars and high debts. Airtel is trying to recover from losses of Rs 2,392.2 crore in the June quarter this year, while Vodafone Idea suffered a loss of Rs 4,873.9 crore.

Airtel may have to pay up about Rs 21,682 crore to DoT, whereas Vodafone Idea may have to cough up close to Rs 28,308 crore towards AGR.

This additional burden will force telecom companies to reduce their workforces. About 40,000 people may have to be laid off in the next six months. Employees in the middle and senior levels will be most impacted.

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