Reliance Jio To Gain As Supreme Court Ruling Will Hurt Rivals, Say Brokerages

Yet, the brokerages said the operators can appeal against the order in the apex court.

A man speaks on a mobile phone while seated in a rickshaw in Varanasi, Uttar Pradesh. Photographer: Dhiraj Singh/Bloomberg
A man speaks on a mobile phone while seated in a rickshaw in Varanasi, Uttar Pradesh. Photographer: Dhiraj Singh/Bloomberg

Reliance Jio Infocomm Ltd. stands to gain as the Supreme Court verdict to include non-core revenue for calculating levies could add to the financial stress of its two biggest rivals, according to brokerages.

Indian telecom operators are incapable of paying thousands of crores as dues and penalties, multiple brokerages said, adding that they the option of appealing against the judgment.

The top court ruled that adjusted gross revenue will include most operations of operators barring a few. That could deal a crippling blow to Bharti Airtel Ltd. and Vodafone Idea Ltd. as the unrelenting tariff far unleashed by Reliance Jio has pushed their debt higher and lowered profits.

Here’s what brokerages said about the fallout of the Supreme Court’s verdict on how to calculate adjusted gross revenue.

Emkay Global

  • Given their financial health, operators aren’t capable of paying such hefty dues.
  • Expect government to intervene to provide relief, which could be in the form of extended payment timelines, waiving-off of certain penalty/interest or staggered payments.
  • Operators may have the option to appeal the order—this is yet to be clarified.
  • Expect increase in debt, license fee and SUC (spectrum usage charge) payouts of operators.
  • See risk to Bharti Infratel’s tenancies with rising financial stress of Vodafone Idea Ltd.

Bank of America Merrill Lynch

  • Expect the government to provide relief to this debt-ridden sector.
  • Expect this decision to have a negative impact on Bharti Infratel Ltd.’s tenancies as Vodafone Idea Ltd. looks to further curtail its costs.
  • Weaker third player is positive from a competition perspective for Bharti Airtel.
  • Reliance Jio Infocomm Ltd. is well placed to capitalise on its competitor’s weakness; could have a first-mover advantage on 5G (network roll-out).

Dolat Capital

  • Expect telecom operators to explore legal options such as appealing to Supreme Court bench or Chief justice of India, provided the judgment isn’t unanimous.
  • Vodafone Idea may be compelled to re-examine its existence in the business.
  • A lot needs to happen from the government and Vodafone Idea so that the latter remains alive in the market.
  • A partial or full fallout of Vodafone Idea will have an impact on the tenancies of Bharti Infratel.
  • Supreme Court blow to incumbents will allow Jio to further widen its lead.
  • Government can potentially support the industry in various forms: reducing license fees and spectrum usage charges, increasing moratorium on annual spectrum payment, defer zero-IUC (interconnect usage charge), refund/adjust accumulated credit against future tax pay-outs and introduce floor price for voice calls or mandate price increases.

Morgan Stanley

  • Understand that telecom companies still have the option to appeal to a five-member bench of the Supreme Court and then to the Chief Justice of India.


  • Judgement will aggravate telecom operators’ already battered balance sheets.
  • Ruling is particularly negative for Vodafone Idea as the heavy liabilities arising thereof and its strained balance sheet can choke its investments in network.
  • This in turn would work to Bharti Airtel and Reliance Jio’s advantage in wresting further market share.
  • Government will have to come up with steps to mitigate the blow.
Supreme Court Rules Against Telecom Operators In Rs 92,000-Crore Adjusted Revenue Dispute