Indian telecom's winter of discontent

Is a spring of revival now a dream or still a strong possibility?

- TV RAMACHANDRAN

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.