Govt responds to SOS from telecom companies, looks at 3 options to help them

india

Updated: Feb 21, 2020 11:08 IST

A review of the calculation of the amount owed by telecommunication companies (telcos) and allowing them to pay in instalments are two of the ways the government is evaluating to address the crisis in the sector without walking back on the Department of Telecommunications’ position that telecom companies (telcos) have to pay their dues.

This position — that the dues as measured by a proportion of adjusted gross revenues or AGR be paid — was one upheld by the Supreme Court’s October 2019 verdict that ordered telcos to pay up Rs 1.47 lakh crore.

Two officials familiar with the matter said the government is considering various options because it wants to prevent any telco from going out of business, something that would, given the size and importance of these firms, adversely affect the investor’s sentiment, restrict consumers’ choice and increase stress in the banking sector.

The officials, who asked not to be named, also mentioned that soft loans are another option being considered, although it wasn’t immediately clear who would underwrite the cost of these.

Since the telcos have raised questions about the computation of the amount, and pointed out what they think are discrepancies, there could be a recalculation of adjusted gross revenue by an independent agency, perhaps an audit firm, the officials said.

The package will be absolutely within the ambit of the Supreme Court’s judgement, they said.

On February 14, the court had harsh comments for both DoT and the telcos for not adhering to its original order and summoned the managing directors of the latter to court on the date of the next hearing (March 17) if they had not paid up by then.

“The government has sought legal opinion in the light of recent verdict of the Supreme Court before it will take a final call in a day or two,” one of the two officials said.

According to the officials at least three senior cabinet ministers are directly involved in this matter. Bharti Airtel chairman Sunil Mittal on Thursday met telecom minister Ravi Shankar Prasad , they said. “AGR is an unprecedented crisis for industry, which is being dealt with by government,” Mittal was quoted as saying by news agency PTI. Mittal and Vodafone Idea chairman Kumar Mangalam Birla met finance minister Nirmala Sitharaman individually on Wednesday.

DoT last week asked all telecom companies to repay AGR dues immediately as per the October 24, 2019 verdict of the Supreme Court. According to the verdict telcos were expected to pay AGR dues of about Rs 1.47 lakh crore by January 23, 2020. Airtel owes around Rs 35,000 crore and Vodafone about Rs 55,000 crore.

Airtel paid Rs 10,000 crore on Monday and Vodafone has so far paid Rs 3,500 crore. After paying the amount on February 17, Airtel said in a letter to the DoT that the payment was made on an “ad-hoc, on account” basis as the company was in the process of “completing the self-assessment exercise expeditiously” and would duly make the balance payment upon completion of the same before the next hearing of the Supreme Court, which is on March 17.

Spokespersons of finance ministry, ministry of telecom, law ministry and Airtel declined comment.

A Vodafone Idea spokesperson wasn’t immediately available for comment.

The first official said the government is listening to specific concerns of the telecom companies and wants to help them. “Closure of any telecom company would limit competition, aggravate unemployment and have adverse impact on their lenders,” he said.

According to industry experts closure of one of the big three — Airtel and Vodfone Idea together serve around 60% of subscribers — would mean direct and indirect loss of employment to about 1 lakh people and a massive financial jolt to the banking sector yet to recover from massive crisis of non-performing assets (NPAs).

Former finance secretary Subhash Chandra Garg said that closure would mean “NPAs will get transmitted to banks, if bank guarantees are encashed”.

“The duopoly of Jio-Airtel would not be in the interest of country. India needs a healthy and competitive telecom sector. It would be in national interest if Vodafone survives as a strong player,” he said. His reference is to Reliance Jio, which had to pay only Rs 195 crore and has already done so.

At the Hindustan Times Leadership Summit in December, Birla had said that Vodafone Idea would have to shut shop if the company does not get any relief.

“If we are not getting anything, then I think it is the end of story for Vodafone Idea,” he said.

“They (government) have publicly stated that they want three players from the private sector and one player from the public sector, so I think we can expect much more stimulus from the government because it is required by the sector to survive,” he said.