Indian telecom's winter of discontent
Voice and Data|March,2020
Indian telecom's winter of discontent
Is a spring of revival now a dream or still a strong possibility?

Reportedly the latest Delhi winter is the coldest in 118 years. Maybe partly due to the chilling effect of the end-October 2019 judgement of the Hon’ble Supreme Court of India in the telecom Adjusted Gross Revenue (AGR) based levies. The ruling gave such a massive jolt to the telecom sector, which had already been teetering for quite a few years at the brink of a precipice that it plunged into the killing financial quicksand at the bottom.

The payment demand on the decreed pending dues of four telcos—Bharti Airtel, Vodafone Idea Limited (VIL), Tata Teleservices Limited (TTSL) & Reliance Jio Infocomm Limited (RJio)—with interest and penalty, is actually much more than their AGR for FY19.

If easy payment term at NPV is allowed, it still does not improve business viability as it keeps the full liability on the books, and just helps cash flow. Further, even if payment is amortized over 15 years, EMI payments would amount to 14% of the yearly AGR of these operators, which are additional to ongoing AGR-based levies and GST levies of about27%- a grand total of over 41%% of net revenues!

The sector contributes 6-7% to India’s GDP every year and has created world-class digital public communications infrastructure without even one rupee subsidy from the Government. Other than direct revenue contributions to exchequer, the spill-over effects of the sector are enormous. As per ICRIER report, a 10% increase in mobile penetration delivers a 1.9% increase in the rate of state GDP growth. Further, a 10% increase in internet subscriptions results in a 3.2% increase in output.

As per an ICRIER report, apps contributed a minimum of Rs 1.4 lakh crore to India’s GDP in 2015-16 and this is expected to touch Rs 18 lakh crore by 2020. As per a WIK report, each user of applications in India receives on average USD 249 (Rs 16,000) of consumer surplus annually. Applied to the total population, this number stands at USD 74 (Rs 4,800) per capita.

It should be noted that, since 2010, over and above the Rs 3.3 lakh crore collected from auction sale, the government has also gained over Rs 1.24 lakh crore and Rs 0.54 lakh crore through license fee and SUC also.

The sector that has been the flag-bearer of liberalization has been brought down abjectly to its knees. A harsh treatment has been meted out to it in the so-called ‘AGR-based LF and SUC issues. The regime of the high percentage revenue share goes back to August 1999 and Feb 2002 respectively, shortly after NTP99 Policy and was appropriate since spectrum was then packaged with the license.


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