Relief to Vodafone Idea, privatization of BSNL necessary to avoid duopoly in telecom sector: CUTS International

ET Telecom, July 26, 2021

To avoid the state of a duopoly in the telecom industry and to ensure consumer welfare, the Central government must provide relief to the debt-laden Vodafone Idea Limited (VIL) and privatize state-run Bharat Sanchar Nigam Limited (BSNL), said Pradeep Mehta, Secretary-General of CUTS International. “Otherwise consumers will suffer from lack of competition.”

In case a telecom operator exits the market, the telecom sector would, in theory, become a duopoly. Although BSNL would the third-largest telecom player in the market its subscribers have been declining, Mehta added.

Friday last week, the Supreme Court dismissed the plea by Bharti Airtel, VIL, and Tata Teleservices (TTSL) seeking direction for the correction of Adjusted Gross Revenue (AGR) calculation, as demanded by the Department of Telecommunications (DoT), which dealt a tight blow to VIL causing its shares to tank sharply.

“The Supreme Court judgment seems like Nelson’s eye, where one deliberately chooses to ignore the problem or convinces itself that the problem does not exist. The apex court has turned Nelson’s eye to the financial health of the telecom sector and ingenuous errors by DoT in AGR calculations, as claimed by telecom companies,” Mehta further said.

VIL had self-assessed its dues at Rs 21,533 crore, Airtel at Rs 13,003 crore, and Tata Tele at Rs 2,197 crore. All three telcos in their petitions had said the self-assessed amount is far lesser than the amount demanded by the telecom department.

The ruling implies that VIL faces dues of Rs 58,400 crore; Airtel, Rs 43,980 crore; and Tata Tele, Rs 16, 798 crore, as per the government’s calculations.

Of these, VIL has paid Rs 7,854 crore; Airtel, Rs 18,003 crore; and Tata Tele, Rs 4,197 crore.

The telcos need to pay their balance dues in 10 installments through March 31, 2031.

Additionally, VIL has a debt of Rs 1.8 lakh crore and a cash balance of Rs 350 crore, and needs to pay Rs 22,500 crore between December 2021 and April 2022 towards debt, AGR, and spectrum dues.

It has sought a year’s time — until April 2023 — to pay its Rs 8,292 crore dues related to spectrum purchased in auctions.

“The judgment is likely to prolong the steep recovery of the telecom sector and moreover, the consequences of the judgment seem dire on the economy and consumer welfare,” further said Mehta.

Any positive intervention by the government could be crucial to pacify the struggling telecom sector.

“Another pragmatic remedy for the telecom market could be setting a floor price for telecom voice and data services by the government,” he added and underlined that in the larger scheme of welfare and competition, consumers will benefit.

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