The final call

Topics Telecom

After the Supreme Court rejected the review petition filed by telecom companies against its order on licence fee dues linked to the adjusted gross revenues (AGR), all eyes are now on the government’s next move. While some 15 telcos — many of which have shut shop or sold their businesses — have to cough up Rs 1.47 trillion, including penalties and interest, the Department of Telecommunications (DoT) has the option of pro-actively seeking the top court’s permission to allow the industry to stagger the payment of AGR dues. In the absence of relief from the government or judiciary, staggered payment is the only option left to save the telecom industry, which is facing severe financial stress.

It is a fact that the full payment of Rs 1.47 trillion will go a long way in meeting the government’s revenue shortfall in the current fiscal year. Additionally, if the AGR dues of more than Rs 3 trillion slapped on non-telecom companies are realised by January 24, the proceeds will mean a massive windfall for a government, which is struggling to plug widening fiscal gaps. But, in this case, the government should refrain from the idea of revenue maximisation and focus on easing the pains of what has been a showcase sector for the country. 

At this point, the DoT or any other government arm should not look at the staggered payment option as a sop for the telecom industry, but as a possible chance of saving the sector. It should also consider the long-term consequences of its action. At least one operator, Vodafone Idea, is likely to go down if forced to make the total payment of over Rs 50,000 crore by the end of this week. That will mean an end of the India journey for a top foreign telecom company that brought in one of the largest foreign direct investments in the country more than a decade ago. Since the sector is not under pressure purely because of competition, the collapse of a large firm in this manner will deter potential investors. It will also affect the banking system and increase the cost for the government. 

Another leading telco, Bharti Airtel, which has to pay more than Rs 35,000 crore as AGR dues, may manage to meet the deadline, if forced to, with the help of its latest fund raising. But that would indeed have an adverse impact on its investment capabilities, the first casualty being its participation in the 5G spectrum auction. Already pushed to a corner because of excessively high spectrum prices in the past and aggressive competition in offering rock-bottom tariffs, following the entry of disruptor Reliance Jio, the telecom industry will not just be left as a duopoly but as a much weaker version of what it has stood for.

The government, which has been fighting the case with telcos for more than 14 years across several platforms, won when the Supreme Court in October last year upheld the DoT definition of AGR for calculating the pending licensing fees and spectrum usage charges. However, the DoT, besides looking at the state of the telecom industry, should consider its long-term revenue goals. The point is if the telcos survive, their revenues will be shared with the government, as is the practice. Why kill the golden goose?

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