Indian government offers token relief to beleaguered telcos
With two of its three major telcos on the verge of bankruptcy, the Indian government has deferred a tiny proportion of what they owe it for a year or two.
Specifically the government is letting operators defer payments due for auctioned spectrum, which amount to Rs 42,000 crore. India, annoyingly, has its own system for naming larger numbers and crore means ten million. While 420 billion rupees might seem like a serious chunk of change, the government also wants Rs 1.47 lakh crore from them for historical license fees and there is no relief being offered on that. Lakh means a hundred thousand, so lakh crore means a trillion, making the latter sum three times larger (we think).
“Department of Telecommunication will give an option to the Telecom Service Providers (TSPs) to defer payment of the spectrum auction instalments due for 2020-21 & 2021-22, either for one or both years,” said the government announcement. “These deferred amounts bill be spread equally in the remaining instalments to be paid by TSPs. Interest as stipulated while auctioning of the concerned spectrum will however be charged so that NPV is protected.
“Deferment of spectrum auction instalments will ease the cash outflow of the stressed TSPs and facilitate payment of statutory liabilities and interest on bank loans. Continued operation by TSPs will give a fillip to employment and economic growth. Improved financial health of TSPs will facilitate maintenance of quality of services to consumer.”
That last part is a masterpiece of understatement. “Continued operation by TSPs will give a fillip to employment and economic growth.” You don’t say. The head of lobby group Cellular Operators Association of India (COAI), Rajan Mathews, tweeted a measured response that made it clear his organisation didn’t think this concession was enough.
“We humbly request the #govt to consider the request on the #AGR front. It’s a legacy & a double taxation issue. We are hoping that the govt will eliminate AGR or redefine it so that #license fee & #spectrum usage charges due can be brought down.” said Rajan S Mathews @rsprasad https://t.co/j5sp4Xj3IK
— COAI (@ConnectCOAI) November 21, 2019
What the industry wants is a significant reduction of the amounts of money being demanded of it by the government. The definition of adjusted gross revenue (AGR) is what has brought about this crisis, but it’s hard to avoid the conclusion that the Indian state is being excessively rapacious towards its operators which, as its own announcement conceded, are important drivers of employment and economic growth.
I have published a number of articles noting the absurdity of the telecoms regulatory system In India since 2000 but the AGR dispute arguably tops everything that has gone before. We face the very real possibility that Vodafone will now exit the market despite Vodafone Idea controlling more than 300 million subscribers. Vodafone has written down its book value in India to zero and its shareholders surely will not let it continue to invest with little or no prospect of recovering the money. Yes, the extraordinary behaviour of Reliance Jio has played a part in the downfall of Vodafone Idea (and Bharti Airtel) but what other government would have let that happen? If Vodafone Idea and/or Bharti is driven out there will be a virtual monopoly or at best, a lop-sided duopoly in a market with more than one billion subscriiers that used to boast more than 10 operators.