The nation’s telecom sector goes by a interval of excessive monetary misery due to mounting money owed after the Supreme Court’s latest verdict towards three telcos in the adjusted gross revenue (AGR) case.
Some telecom companies similar to Bharti Airtel and Vodafone Idea (VI) are beneath stress in the meanwhile as they’ve to repay a big quantity to the federal government as half of pending AGR dues. The two main telcos together with Tata Teleservices have to clear their dues by March 31, 2031, in 10 instalments.
Of all of the telecom companies, VI faces the hardest hurdle because it has been requested to clear the largest share of AGR dues. Simply put, the corporate is dealing with an existential disaster in the meanwhile due to an absence of funds as it’s struggling to generate sufficient money from the enterprise.
Deutsche Bank lately stated in a report that the federal government ought to convert VI’s debt into fairness to keep away from a duopoly within the telecom sector. The financial institution stated it’s the solely best answer after the highest court docket dismissed the telecom agency’s utility for re-computation of AGR dues.
“The vast majority of Vi’s debt is spectrum and AGR obligations, and the company will need to take on 5G spectrum at some point too. Private investors are extremely unlikely to save the company, given successive governments seeing telecom capital as something to target,” Deutsche Bank analysis analyst Peter Milliken stated in his report.
It could also be famous that VI had a complete debt of roughly Rs 1.8 lakh crore as of March 31, 2021 — Rs 96,270 crore value deferred spectrum obligation, AGR dues of over Rs 60,000 crore and financial institution debt of Rs 23,080 crore.
Not simply VI however different telcos are additionally beneath monetary stress due to the pandemic. Bharit Airtel CEO Sunil Mittal has stated earlier this month that there’s “tremendous stress in the telecom sector” and tariffs want to go up quickly.
He added that Airtel will not hesitate to raise prices, however received’t do it unilaterally.
“To say telecom industry is in a bit of trouble is actually an understatement. It is in a tremendous amount of stress. I hope the government, the authorities, and the telecom department focus on this issue and ensure India’s digital dream remains intact through the provision of at least three operators,” Mittal stated.
WHAT GOVT PLANS TO DO?
The authorities has taken be aware of the monetary stress on all the telecom sector and is contemplating a number of long run measures, reported The Economic Times.
Some of the chances which can be being mentioned together with prospectively redefining AGR to exclude ‘non-telecom items’ and allowing telcos to surrender unused spectrum for a small penalty. The same was confirmed by senior government officials who spoke to the publication.
One of the officials quoted in the report suggested that the government is exploring ways to improve the financial health of the sector and not just one company.
However, the measures that are being discussed or looked at may take a while to get approval. The officials told ET that measures would require extensive consultation with the finance ministry due to the revenue implications, including reduction of the annual licence fee (LF) and spectrum usage charge (SUC).
The most important of all the measures that are being looked at is redefining AGR to exclude non-telecom items. While the government won the longstanding battle against telcos in Supreme Court, the matter still remains a big burden for the entire telecom sector.
In September 2019, the top court backed the government and widened the deification of AGR to include non-telecom items. The judgement was challenged several times, but the outcome has remained the same.
However, the decision seems to have severely impacted India’s legacy telecom together with Bharti Airtel and Vodafone Idea. The two entities are dealing with mixed dues of Rs 1.02 lakh crore in AGR-related licence charges and SUC dues. It could also be famous that LF and SUC are decided and paid on the premise of AGR.
If the senior officers quoted within the ET report are to be believed, the federal government is exploring the likelihood of developing with a contemporary definition of AGR for excluding all non-telecom income.
PROVISION TO SURRENDER UNUSED SPECTRUM
Another reform that’s being checked out by the federal government is a provision to permit telecom companies to give up unused spectrum together with a small penalty. It could also be famous that telcos can solely commerce or share airwaves with one another as per the present regulation.
However, the officers really feel that telecom will profit if they’re in a position to return unused spectrum to the federal government, albeit with a small penalty. Telcos received’t thoughts the penalty as they incur deeper losses after they have to pay instalments — for the spectrum they don’t even use — for years.
Older telcos which have been working for years have requested the federal government a number of instances to change key guidelines to assist all the sector. However, little motion has been taken over time to pull the stressed sector out of hassle