Health of telecom sector vital

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The granting of 10 years’ time by the Supreme Court to telecom service operators to pay their Adjusted Gross Revenue (AGR) dues to the government has provided some relief to the companies which are all financially stressed. They will now have some elbow room and time to make arrangements for the payments. AGR dues are the revenues owed by the companies to the Department of Telecom (DoT) as licence fee and spectrum charges for using the spectrum owned by the government. There was a dispute over the definition and scope of AGR which has now been decided by the court in favour of the DoT, and so the companies have to make the payments now. The total AGR dues of all companies amount to Rs 1.6 lakh crore. The companies had sought 20 years’ time for payment and the government had agreed to this. The government took a sympathetic view because it realised that the industry’s present financial situation is very difficult. It also told the court that a single payment would crush the industry.

The court also recognised the difficulties in the situation but was not ready to be very lenient on the repayment timeline. But the order seems to have been generally accepted. Two major companies, Reliance Jio and Bharti Airtel, may not find the payment very difficult. Vodafone, the weakest of them, might find the going tough but some fund-raising plans, which have been proposed, might lessen the pain. If Vodafone finds it difficult to meet its obligation or lands in more trouble, it may not be good for the industry or the customers because the competition will be reduced to just two players. It was the high competition among the players that have kept the telecom tariffs low so far. That competition also led to the communication revolution from which the country benefited hugely. But a combination of low tariffs and high obligations to the DoT made the industry almost sick. Some companies collapsed, others were taken over. The companies also owe much money to the banks.

There are many business issues to be resolved even after the various debt burdens are eased. The telcos will not be able to continue with the present tariff regime and stay afloat. So, it is most likely that tariffs will be raised and customers will have to pay more for the data that they consume. There will have to a reasonable balance between the interests of the industry and those of the customers. The health of the sector is vital for the country and the economy.

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