Why Isn’t Govt Intervening in the Telecom Sector Crisis?

There is a red alert across the Telecom sector and yet the government hasn’t done anything to ease their case.

How long can telcos survive without govt intervention?

(Photo: The Quint)

Video Editor: Ashutosh Bharadwaj

It is a national emergency situation in the telecom sector. The telecom sector had been gradually sinking and it has finally crashed now. Now, not just telecom companies will be affected but all of us who extensively use their services. It has become critical for our survival, business and economy. It is all under threat. The prices may increase exponentially.

We are paying for the telecoms as taxpayers as well as consumers.Let me tell you how.

The Indian telecom sector has been in a 1.47 lakh crore debt. On top of that, the Supreme Court has ordered telecom companies to pay as per the government’s Aggregate Gross Revenue Formula (AGP) whereby the companies will have to pay 1.5 lakh crore rupees at the earliest. This sum is inclusive of the penalties and interest levied.

If the Supreme Court implements this law by the government then it will be a tough situation for PSUs. Companies requested the government and SC for some relief. But the government kept quiet even though what it should have done was change the law because the Supreme Court was interpreting the law in a narrow way. It should have found some way like going to the Supreme Court and seeking time for calculations.

It did nothing of the sort. Now let us remind you about the 2G scam which involved Rs 1.76 lakh crore. The sector was ruined. Several companies left the country. Supreme court cancelled 122 telecom licenses.

But later, a special CBI court said that no scam had happened. Basically, companies were ruined and there occurred a political crisis but the court said that there was no scam at all. By then the sector had been ruined. After that, there were four players left- BSNL, MTNL, Vodafone, Airtel and then Jio.

Now it seems that the SC is upset and the government is doing nothing so Vodafone-Idea might find it difficult to exist. Airtel deposited money and has backing from Singapore so it might make it But for Vodafone, to pay such a sum is difficult.

How Can Telecom Sectors Overcome This Crisis?

Experts presently don't see a solution in sight especially because of SC's rigid stance. Vodafone has said that it might become difficult for them to continue. This paranoia is quickly spreading across the sector.

The telecom sector will be losing a huge sum of money because of SC’s rigid stance coupled with the sector already being on a huge loss.

Vodafone-Idea has to pay Rs. 53,000 crores which Airtel will have to pay Rs. 35,000 crores. 

Supreme Court threatened telecom companies with ‘contempt of court’ charges when they failed to pay.

When SC felt that a desk officer challenged their order and the government denied it, the court ordered the telecom companies to immediately pay the amount.

The government then ordered these telecom companies to pay the amount to which Bharti Airtel deposited Rs 10,000 crore. On 17 February 2020, Vodafone approached SC and offered to pay Rs 3,000 crore but the court rejected it.

Companies are tense over producing the huge sum of money. The government is aware that they do not have any money. Experts are contemplating as to when will the government intervene?

There were set fees for spectrum charges and licenses. This is a 17-year-old struggle. When the law was implemented as per AGR, The Gas Authority of India Limited (GAIL) will have to pay Rs 1,72,000 crore to the government because it had laid optic fiber along with the gas pipelines so that they too could enter the telecom business.

A total of extra Rs 2 lakh crore for services it never provided. They may have made use of these licences for their internal communication which would have maximum cost them Rs 10-30 crores.

In IL&FS, the government came into the picture late and did very little to help the situation. You've also seen the Yes Bank crisis and the downfall of Jet Airways. These three crises tell us that when there is a crisis in the economy, the government doesn't step in and play guardian- it chooses to stay aloof.

It is possibly afraid of allegations of crony capitalism or accusations of helping companies. This is why it doesn't help. It can also be that the government desires and a lot of people wonder that it wants the money in its own treasury. The flaws like these are paid for by consumers and taxpayers.

The SC decision is the ultimate. However, that doesn’t mean it’s perfect. It’s an ongoing commentary that when the government shirks its responsibilities that is where the SC should be overactive.

This time the SC also became contemplative when the judge said that if the SC orders aren't implemented, then should they leave the country and should the courts close down? Emotions aside, the bitter truth is that we're in the midst of an economic slowdown

Right now the world is discussing that we're getting caught in the policy quagmire.
There is unpredictability and instability. Digital India can be harmed in this process. In this crisis and emergency the government has taken too long to step in. Yet there's nothing we can do except hope that the government intervenes in this immediately and tells the Department of Telecommunication to give these companies time and relief and help bring the telecom sector in order.

What’s Vodafone’s Way Out?

Vodafone has the option of going to NCLT and declaring themselves bankrupt After that, there can be partial recovery because there's not much left to give. Apart from this, Vodafone has 50,000 employees whose jobs are at risk. For the customers, they have two options remaining which are Jio and Airtel. You have seen the aggressive marketing of Jio which included free data to expand markets but these two companies don't have the infrastructure to serve all of Vodafone's customers. So this transition will also be a difficult one When two players are left, in a duopoly the bigger player becomes the dominant one and that can result in a cartel and your call prices could shoot up.

If the telecom sector has to be saved which has a role in the wider economy and digital India, then at least three players have to be present. Only then can there be a healthy competition, and the sector can grow properly.

Aspirations of 5G

When only two companies will be left for the 5G spectrum, they'll face financial stress and won't be able to bid for much. They won't have money for new infrastructure or new investments. Even if they do manage it'll take time to set up new infrastructure.

In business or in the economy there can be problems. This government claims it is very responsive and that there's the ease of doing business. However, in this telecom crisis, the government was nowhere in sight and that shocks people. However, this is a pattern.