AG clears way for Rs 3,050 cr penalty on Airtel, Voda, Idea

Paving the way for Rs 3,050 crore cumulative penal action on telecom operators Bharti Airtel, Vodafone and Idea Cellular, the Attorney General is learnt to have opined that the Department of Telecom has power to impose penalty on grounds of poor quality of service.

“AG has opined that DoT can impose penalty on telecom operators for violating quality of service rules,” a source said.

The Telecom Regulatory Authority of India (TRAI) had recommended imposing Rs 1,050 crore penalty each on Airtel and Vodafone and Rs 950 crore on Idea for violating quality of service rules.

TRAI, in its recommendation to DoT, said it has found the trio non-compliant with licence conditions and service quality norms, given the high rate of call failures and congestion at interconnect points for Reliance Jio.

Following TRAI’s recommendation, the Telecom Department sought AG’s opinion on the matter last week, sources pointed out.

The DoT was awaiting AG’s opinion before proceeding on the penalty suggestion of TRAI.

While giving its recommendation to DoT, TRAI had noted that denial of interconnection by the three operators to Reliance Jio “appears to be with the ulterior motive to stifle competition and is anti-consumer”.

The regulator had, in fact, stopped short of recommending cancellation of their telecom licences, saying it may lead to “significant consumer inconvenience”.

The recommendation came on complaint by Reliance Jio that over 75 per cent of calls on its network were failing as incumbents were not giving sufficient points of interconnect to help complete calls.

Meanwhile, telecommunication companies across the world are sharpening their merger and acquisition focus as 48 per cent executives surveyed indicate that they are actively pursuing a M&A in the next 12 months, says an EY report.

According to EY’s 15th biannual Telecommunications Global Capital Confidence Barometer (CCB), sector convergence and advances in technology and digitalisation are altering the telecommunications landscape globally.

Some of the major factors that are driving the M&A in the telecom sector include -- sector convergence, impact of digital technology on their business model and acquiring talent among others.

“While in-market convergence and consolidation remain key drivers of sector M&A yet operators are turning their attention to smaller deals that can fill gaps in portfolios or provide innovative assets or people. In this light, a number of carriers are pursuing ‘bolt-on’ acquisitions in areas such as Internet of Things (IoT) and over-the-top video services,” Prashant Singhal, Global Telecommunications leader, EY said. 

As per the report, almost half (49 per cent) of executives cite sector convergence and increases in competition as the biggest disruptor to their core business, while 43 per cent say the impact of digital technology on their business model is the most prominent issue on the boardroom agenda.

“Around 48 per cent of telecommunications executives indicate that they are actively pursuing a merger or acquisition in the next 12 months, up from 43 per cent six months ago,” the report said.