The Supreme Court On October 24, 2019 upheld the government's way of calculating telecom revenue, on which licence fee and spectrum usage charges are computed.
The Supreme Court ruling on adjusted gross revenue will not just lead to the collapse of the telecom sector but will also have a cascading effect on several other sectors including power, steel and railways, according to industry chamber FICCI.
The Federation of Indian Chambers of Commerce and Industry (FICCI) in a letter to Finance Minister Nirmala Sitharaman seeking her urgent intervention to resolve woes in the telecom sector said the debt-ridden industry has no appetite left to invest in networks and future technologies while businesses across the world are exploring new opportunities around emerging technologies like 5G, artificial intelligence and internet of things.
“Given the multiplier impact the (telecom) sector has on the economy and various intermediary industries, it is of critical importance that the sector remains healthy, dynamic and vibrant,” FICCI said. The Supreme Court On October 24, 2019 upheld the government’s way of calculating telecom revenue, on which licence fee and spectrum usage charges are computed.
As per the initial calculations, access players like Airtel, Vodafone Idea and other operational telecom operators may have to pay the government a whopping Rs 1.33 lakh crore within three months. Telecom Minister Ravi Shankar Prasad in Parliament last week said that there is no proposal before the government at present on waiver of penalties and interest on outstanding licence fee payments based on adjusted gross revenue (AGR), or on extending the timelines for telcos to pay up their statutory dues.
“This ruling will have a cascading effect and will severely impact many other companies in multiple sectors such as internet service providers, satellite communications providers, cable operators and even companies in power, steel and railways sector,” FICCI said.
According to internal estimate of the Department of Telecom, telecom companies which are operational at present will have to cough up around Rs 1.33 lakh crore by January 2020 as per the apex court order. This is beyond the total debt on the telecom sector estimated to be around Rs 7.87 lakh crore as on August 2017.
“…As you are aware, currently the sector is saddled with a massive debt and has almost no appetite to invest in networks and future technologies. Adding further woes to the sector, the recent ruling on the AGR, dues of the telecom service providers will lead to an unfortunate and disastrous collapse of the already battered sector,” the letter said.
Both Bharti Airtel and Vodafone Idea have expressed uncertainty on continuing their operations following the apex court judgement and in the absence of relief from the government. Vodafone Idea posted an unprecedented loss of 50,922 crore– highest ever by any corporate in Indian Inc and Bharti Airtel posted it highest loss of Rs 23,045 crore in the second quarter of current fiscal.
Reliance Communications posted Indian Inc second biggest loss of Rs 30,142 crore following the apex court judgement. “At a time when the world is witnessing the advent of new possibilities and business opportunities from emerging technologies such as 5G, AI, IoT, etc which will redefine the way businesses and economies will work in the coming decades, it is important that India retains its leadership position in the telecom space,” the letter said.
The industry body called for change in policy saying that timely intervention and support will not only save the sector from the brink of collapse but ensure a healthy growth adding to the economic momentum of the country.
The government recently doled out a Rs 42,000 crore relief to debt-laden telecom companies after it agreed not to take any payments for spectrum they use for the next two years.
The Union Cabinet approved giving Bharti Airtel, Vodafone Idea Ltd and Reliance Jio an option to avail of a two-year moratorium on payments they were supposed to make in yearly installments for the spectrum bought in auctions.
While the move will give Rs 42,000 crore relief to Bharti Airtel, Vodafone Idea and Reliance Jio, the government is unlikely to intervene in the Supreme Court-mandated statutory payments, top sources said.