Talking shop

Let's talk telecom. A hitherto sunrise industry has clinically—even systematically and recklessly—been dismantled and relegated to a post-sunset status. The culprits are yet to be identified. They perhaps never shall be, though everyone knows who they are. That's because we are still in denial mode, claiming all is well with the telecom industry and nothing is wrong.

Let's face it. In India, telecom has changed livelihoods, even lives, bringing Indians closer to the world of connectivity and digitisation. Much more than any other social, governmental or corporate overture can ever hope to achieve. One now reaches out to relatives, friends, even strangers, instantly. WhatsApp, Facebook, Twitter, Instagram, Tik Tok, LinkedIn, E-mails, the list is mind-numbing. Overnight, our plumber, carpenter, painter, electrician, even the sabziwaala has become a phone number. A single call, even a missed call, leads to easy access and instant gratification.

Perhaps the powers that be have found this too good to let it last and the industry is staring death in the face. Unless radical measures are taken this coming week, starting tomorrow, the average Indian shall bear the brunt, having to pay through his/her nose to continue to avail mobile connectivity or lose easy access altogether.

Here is why the situation got to be where it presently is and will likely continue to do so-

Sledgehammer blows have repeatedly been peppered on Indian telecom, an industry largely responsible for shaping the new India over the last two decades. First, we had the so-called '2G scam' of Rs 176,000 crore, which was later deemed to be "not a scam" after all. Then there were license fees, interconnect and termination charges, spectrum usage charges, AGR, annual spectrum auctions and due payments, finance charges and network expansion. Over the last decade, these have inexorably broken the back of the telecom sector. Tata Teleservices, Uninor, Aircel, MTS and Reliance Communications have shut down mobile telephony operations, hundreds of thousands of crores of investments flushed down the tube. Only their combined debt survives, well over Rs 100,000 crore.

The mighty have fallen too, with Idea Cellular and Vodafone India forced to merge operations in a last-ditch attempt to survive. Bharti Airtel, India's telecom pathfinder and the once-shining-light of the industry, is barely limping along, with its financials today showing a pittance of a return on hundreds of thousands of crores of rupees in investments made over 20 years-plus.

And in a final sledgehammer blow, telecom industry veterans Bharti Airtel, Vodafone Idea, Tata Teleservices and Reliance Communications, amongst others, have now been asked to cough up Rs 92,000 crore in Adjusted Gross Revenue (AGR) dues to the Department of Telecommunications (DoT), with total past dues amounting to Rs 1,47,000 crore. In a October 24, 2019 order, the Supreme Court ordered telcos to pay all past dues to the government by January 23, 2020. A review petition filed by telecom operators against this directive was shot down by the Supreme Court on January 16, 2020.

As per DoT's estimate, the liability of Bharti Airtel Group is over Rs 62,000 crore, Vodafone Idea over Rs 54,000 crore and BSNL and MTNL over Rs 10,000 crore. Companies under insolvency like RCOM and Aircel have dues outstanding worth over Rs 32,000 crore and companies under liquidation nearly Rs 1,000 crore. Even Tata Communications, in which the government holds a 26 per cent stake, has made no provision for the DoT's demand of over Rs 6,600 crore for AGR dues.

In a recent note, Deutsche Bank said- "The government will find it too expensive to provide a large enough fix needed to prop up Vodafone India (and other telcos) for anything other than the medium-term. The Aditya Birla Group (one of Vodafone India's co-promoters) may even consider getting Vodafone Idea to go into bankruptcy." Vodafone Idea Chairman Kumar Mangalam Birla has publicly said the company will shut down in the event of no government or judicial relief in the AGR matter.

Telecom operators have now filed a curative petition against this SC order, seeking judicial relief and a moratorium on the demanded payments. This is also because, despite repeated outreach, meetings and pleas by the telecom operators, DoT has extended no relaxation to telecom companies on the payment of AGR dues. The Supreme Court has now agreed to hear this curative petition in the coming week.

The only saving grace for telcos is that DoT, which has all along taken a hard position on this matter, issued a circular a few days back directing that no coercive action be taken against the operators for non-payment of AGR dues within the SC-stipulated time-frame of January 23, 2020. But this is only a temporary relief for telcos, already in the midst of a numbing financial crisis.

The coming week is big for Indian industry, as it may redefine business continuity and foreign investment flows into India. To an extent, it will also spell out the future of Indian banks, which have a massive exposure to Indian telecoms with nearly Rs 150,000 crore in extended debt. If the telecom industry does not get any relief from the Supreme Court and/or DoT, many Indian banks may be looking at a choppy ride into the sunset. Fearing such a scenario, the Reserve Bank of India and a consortium of bankers are learnt to have sent out an SOS to the Government, suggesting a moratorium or instalment payments for telecom companies in the matter of payment of AGR dues.

Yes, incumbent telecom operators need to share the blame for this ignominious situation. They have splurged too much on marketing, spectrum auctions and network expansion and have been completely wrong with their growth and revenue estimations, beginning with the 3G data market. Telcos were also blind to the competitive blitz that would be brought in by Reliance Jio and were caught totally unprepared, even clueless.

There is a tortuous story being played out for Indian businesses and corporate financial figures and the country's economic numbers bear an impotent testimony to this.

Real Estate. Chemicals. Power. Hospitality & Tourism. Aviation & Aeronautics. Infrastructure. Pharmaceuticals. R&D. Housing & Roads. Telecom. Information & Technology. Defence. All of them are crying wolf. Thousands upon thousands have lost their jobs in these sectors.

Unless radical measures are taken this coming week, and then forth, the average Indian will feel the impact on his/her personal life.

Views expressed are strictly personal