The Cellular Operators Association of India led by Bharati Airtel and Vodafone Idea, have resorted to threatening and blackmailing the Indian government, by raising a false alarm on unprecedented crisis in telecom sector after the recent Supreme Court judgement on definition of Adjusted Gross Revenue.
They are threatening and blackmailing the government by referring to possible job loss; quality of service loss and loss of investments in the sector.
Many media picked up unconfirmed reports about Vodafone shutting its operations in India if the government does not give some relaxation to the company on demands for mobile spectrum fees.
If the company wants to exit India, so be it? Because, in its absence too, there will be vibrant competition between PSUs and private players, including the new entrants.
Moreover, it has been been claiming financial stress since long, but raking in moolah without bothering to modernise the networks, as evident for TRAI data in its IUC CP.
According to a Reuters report, Vodafone Global CEO Nick Read raised questions against Indian government by saying, "Financially there has been a heavy burden through unsupportive regulation, excessive taxes and on top of that we got the negative Supreme Court decision."
Is there any merit in the claims made by Read and COAI?
In contrast, the government has been more favorable to the telcos than what is being made out to be by Read and others. It had reduced 15 per cent AGR fixed as license fee 13 per cent and lastly to 8 per cent in 2013, which resulted in a massive loss of more than Rs 3 lakh crore, under the revised policy effective from 1999.
The government and judiciary also are convinced that the companies were under-reporting revenues for long. In 2017, the Comptroller and Auditor General of India, in its report tabled in Parliament, had claimed that six private telecom players had understated their revenues by over Rs 61,000 crore, causing a loss of Rs 7,697.62 crore to the exchequer.
In contrast, the telcos were unsupportive as they broke the promises made to the government under the contract and went on to make abnormal profits through cartelisation, which helped them to flourish by charging heavily on data and voice services, but Jio's entry compelled them to reduce tariffs, benefiting subscribers.
Also, they did not make provisions, which should have been done, as they were aware of the government and court's position as early as 2008 and 2011.
On raising a false alarm on unprecedented crisis in telecom, if the situation was as such, how on earth Airtel started and continued business in African countries despite initial "losses?"
The truth is - the sector is in the consolidation phase, and hence, short-term losses during this period cannot be taken as stress, when an investor looks for future opportunities, especially in an era of Internet of Things (IoT), blockchain technology and robotics, which promise to act as a multiplier in the economy.
Therefore, the talk of the stress is only to get maximum concessions and no company will exit for sure considering the bright future. And even when if the stress exits, it cannot be attributable to the policymaker as they are result of wrong business decisions.
Both Airtel and Vodafone have sufficient financial capacity to pay the government dues by monetising their existing assets and investments and by issuing fresh equity in their companies.
These service providers have stakes in many profitable ventures in the country and abroad and have made multi-million dollars of profits in the countries post investing the proceeds from telecom business, including the regulatory levies withheld for decades.
The telecom industry is staring at Rs 92,641-crore payout following the verdict. The court last week had given verdict in favor of the government, who sought inclusion of revenue from non-telecommunication businesses in calculating the AGR of telecom companies, a share of which is paid as licence and spectrum fee to the exchequer.
Bharti Airtel faces a liability of around Rs 42,000 crore after including licence fees and spectrum usage charges, Vodafone-Idea about Rs 40,000 crore and Jio around Rs 14 crore.
What is required on part of the promoters and top management of the companies is to sincerely pay up AGR as agreed in the licence conditions and restore their credibility.
And, three months time given by the court to share the revenue is lenient compared to stringent provisions of the Insolvency and Bankruptcy Code 2016. Period.
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