News & Analysis

Your Honour! Don’t Judge India’s Telecom Sector Thus 


Image courtesy: 

The telecom sector, already impacted by very high capex and lowest possible tariff, will be dealt a death blow if  the Honorable Supreme Court continues to play hardball.

“The world isn’t fair, Calvin.”
“I know Dad, but why isn’t it ever unfair in my favor?”
― Bill Watterson, The Essential Calvin and Hobbes: A Calvin and Hobbes Treasury

The Indian telecom players, barring Reliance Jio, are asking the same question, again and again and again. With the sector in deep stress due to past capex and forthcoming capex due to 5G and tariffs that are universally acknowledged as being the lowest in the world, the impending SC order on AGR dues time frame is likely to have a massive impact on the sheer sustainability of many players. Vodafone, despite the bravado of the last two days, will buckle under, if the SC refuses to extend the timeline for repayment of AGR dues to at least 15 years as requested by them. Airtel will also likely get stressed, and the only player left standing will be Jio, alongside BSNL which even its parent GoI doesn’t count.

So what has led to this sorry state, barely 25 years since the telecom industry went into overdrive? The sector which was one of the key building blocks of the economy has morphed into a litigious, moribund, bleeding animal getting into battles with the establishment and judiciary every few years. Why is it that the government of India, responsible for the health of the economy, has been completely inept in handling the telecom sector? And more importantly, why is it that the Honorable Supreme Court is hell bent on proving a point even if it is at the cost of the sector, and finally the consumers ?

Let’s face it: Unless the Supreme Court allows for a long-term payment plan for the AGR dues, the sector will be left with two players, a fact that Sunil Mittal, Chairman of Bharti Airtel has said, according to a report in the Economic Times. Essentially, that makes Jio’s path absolutely clear as the company has raised a staggering Rs 1,52,055.45 crore since March 2020 by selling under 33% of the company, Jio Platforms Ltd, while closest rival Bharti Airtel reported a net LOSS of Rs 15,933 cr in the first quarter of the fiscal, after provisioning for AGR dues. Airtel was able to raise a measly Rs 15,000 cr in the same period. That will be the chasm between the two players left standing at the end of the battle.

This is not a tenable situation for the economy. The government and the courts must realise that the telecom sector is far too critical to the growth of the Indian economy and it cannot be ceded to one single company on a platter just for some sins of the players- and some of the government. A resolution of the current financial situation is the crying need of the hour.

Let us also not forget that Telecom is one of the few sectors which has seen the maximum exits of foreign players in the last 20 years. For an economy that wants to be one of the world’s largest markets, that can hardly be an advertisement.

The Department of Telecom must also share a large part of the blame. For years, it has dithered, delayed, and created innumerable bureaucratic roadblocks that have frustrated the early entrants. It has swung from imposing one of the highest tariffs in the world  (Rs 16 per minute) to dithering on whether a floor on tariffs is needed at all, even when the economics show that the current data rates are simply unsustainable.

At the same time, the government has announced a package of Rs 69,000 cr for the ailing BSNL and allowed the best people in the company to leave under a generous Voluntary Retirement Scheme (VRS), thus ensuring that any hope of professional management in BSNL is completely snuffed out and it continues to be a bit player, unable to pose any serious challenge to emerge as a credible service provide

As the drama plays out, it is not far-fetched to assume that the powers-that-be are simply handing over the Indian telecom sector to one 7000 pound gorilla and everything else is simply smoke and shadows.

Leave a Response