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Telecom crisis not limited to AGR, problem much deeper: Subhash Chandra Garg

BusinessToday.In     February 19, 2020

Telecom crisis in India is not limited to AGR (adjusted gross revenue) related issues, but instead it is much larger and deeper, says former finance secretary at the department of economic affairs, Subhash Chandra Garg in a blog post. He said the telecom crisis today is much bigger than it was in 1998.

"The saviour of 1998- the revenue sharing regime- is ironically proving to be the reason of their big woes now," Garg said.

The former bureaucrat, who worked closely with former finance minister Arun Jaitley, said that Indian telecom business (both voice and data) is headed towards becoming a duopoly (Reliance Jio and Bharti Airtel) with the remaining two players - Vodafone Idea and BSNL-MTNL - hurtling towards eventual shutdown, which might as well be an abrupt collapse.

"This has enormous consequences for over 40 crore of the customers of Vodafone-Idea and BSNL-MTNL in terms of continuous availability of telecom services and also for competitiveness in the industry itself," Garg said.

According to Garg, Vodafone Idea, the country's second largest telco in terms of subscribers, is sitting on the edge of bankruptcy. The company reported consolidated net loss at Rs 50,922 crore in the September quarter following the AGR judgement virtually wiping out the entire net worth of the company.

"With Supreme Court sticking to the AGR judgement, it seems virtually the end of the road for the Vodafone-Idea," he added.

The Supreme Court's recent order on the AGR, asking the telecom major to pay Rs 53,039 crore to Department of Telecommunications (DoT), has put it in a tight spot. Currently, Vodafone Idea owes Rs 88,530 crore to the department of telecom (DoT) for the spectrum that it has bought in the previous auctions. This is in addition to the AGR liability of Rs 53,039 crore.

Garg believes that Vodafone Idea is quite unlikely to be able to pay-up the AGR related dues. Even if the company somehow manages to do so (making other capital contributing companies sick in the process), it has no money to make investment in 5G or even upgrading the 4G network, he said.

"Vodafone-Idea lost whopping 3.64 crore subscribers in the single month of November 2019. It has lost over 6 crore subscribers in first nine months of 2019. It would be no surprise if Vodafone loses a total of 10 crore subscribers in the year 2019-20. Very clearly, it is not going to survive unless something is done," he added.

"The duopoly of Jio-Airtel would not be in the interest of country. India needs a healthy and competitive telecom sector. It would be in national interest if Vodafone survives as a strong player. There are two options to ensure this," Garg said.

It is notable that all the companies, other than the three- Jio, Airtel and Vodafone Idea- have either shut shop or are in insolvency process or are fighting cases against the Government in Courts or international Tribunals. Erstwhile telecom majors like Anil Ambani's Reliance Communications and Aircel are in insolvency process.

By Chitranjan Kumar

Also Read: AGR crisis to haunt Modi govt just as 2G scam spooked UPA

Also Read: AGR dues: Who hurts if Vodafone Idea goes down?

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