Partial relief
Context: AGR dues should not be allowed to impair Customer centric investments in telecom.
About:
- The Supreme Court’s decision to allow telecom service providers 10 years’ time to settle their adjusted gross revenue (AGR) dues to the government comes as a partial relief to the debt-laden industry.
- This will give the older providers, especially Vodafone Idea, the crucial breathing space to figure out how they can reconfigure their business plans to stem the relentless flow of operational losses and garner the resources to make the sizeable annual payments to the Centre over the next decade.
- However, in setting a time frame, the Court, which acknowledged the troubled landscape facing the lynchpin industry, seemed to brush aside both the companies’ requests for a longer horizon as well as the Centre’s well-deliberated recommendation for a 20-year repayment period, merely terming it “excessive”.
- The government having realized the enormity of the problem and its potential for significantly disruptive consequences to not just the industry but also the larger economy as a whole had thrashed out the matter at various levels, including within the Cabinet, before submitting its view.
- Without naming any company, the Centre had made clear that were the AGR dues to be sought at one go; it could well push a service provider into insolvency proceedings.
- Such a turn could potentially impact millions of subscribers, with the surviving operators finding their capacities stretched to handle a sudden surge of mobile portability requests while simultaneously maintaining quality of service.
- The Indian Banks’ Association (IBA) had also explained its position in seeking a judicious and non-disruptive outcome. The IBA represented the various lenders, who have much at stake given that industry debt including that which is under resolution as part of the Insolvency and Bankruptcy Code process amounts to over ₹_4lakh
- The Court, in its order, did take cognizance of the multiple threats to the industry’s wellbeing:
- the depressed levels of average revenue per user;
- the fraught competitive landscape where a new entrant’s tariffs had triggered a price war hurting revenues;
- a surge in data usage even as the price of such data plans remained almost unviably low;
- and an overall diminishing ability to continue to invest in capital spending for infrastructure upgradation and
- New technology including the upcoming adoption of 5G networks.
Conclusion: While the companies themselves are yet to decide on whether to seek a curative review of the latest verdict, the future of India’s ambitious dreams of enabling a pan-Indian digital ecosystem that seamlessly connects the remotest rural inhabitant with a plethora of e-enabled services hinge on ensuring the industry stays healthy and vibrant.
For that, the government needs to look beyond the AGR issue and re-imagine the way it prices and seeks to monetise the precious yet immutable public asset of radio spectrum in future.
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