Telecom Sector's Towering Woes

Although the Supreme Court’s ruling has precipitated a crisis, the sector’s problems run deeper

- Samar Srivastava

HIGH TAXES, LOW TARIFFS, AND a penalty levied by the Supreme Court (SC) have created the perfect storm for India’s telecom companies. As Bharti Airtel, Vodafone Idea, Reliance Jio (Reliance Industries is the owner of Network 18, the publisher of Forbes India) look for government forbearance in dealing with the ₹75,000 crore in penalties levied by the SC, based on its interpretation of the definition of annual gross revenues (AGR), there are indications that a one-time relief is unlikely to lead to a smoother ride ahead. The next year could see further stress on their balance sheets.

Vodafone Idea and Bharti Airtel are staring at an AGR liability of ₹25,000-₹55,000 crore (the difference is on account of the companies’ calculation and the Department of Telecom’s calculation). While they’ve deposited a part of the levy, both firms have indicated they need more time.