Telcos may be allowed to to pay their AGR dues over a longer period

The Ken has learnt that the Indian government may allow telcos to pay their AGR (adjusted gross revenue) dues over a longer period.

We also have something on 5Gi—how the telcos and vendors are using mainstream media to plug technically wrong assertions about it.
The dynamics between shareholders and companies are changing. Starting with how shareholders are coming together to go against company promoters.

Will the government extend the timeframe for AGR dues payment to 20 years?
Pratap Vikram Singh
Till about a fortnight ago, it appeared that the survival of the number three telecom operator in India, Vi (formerly Vodafone Idea), was dependent on the government and the market leader, Reliance Jio. For cash-strapped Vi, which failed to onboard investors in the last year and is not in a position to raise tariffs unilaterally, the ball was in the government’s court. Now that has reversed.

There is a new bargain between the telco and the government. The government is preparing a relief package, and it’s public knowledge now.

However, it expects Vi’s promoters to give an assurance of their commitment to invest and explain their strategy for the next few years. In the past, the promoters have publicly reiterated time and again about their unwillingness to invest any further in the telecom venture.

At the moment, there are a range of options on the policymakers’ table. We already know that it is considering rationalisation of levies—a demand endorsed by the Telecom Regulatory Authority of India (Trai) way back in 2015—and extension of the moratorium on spectrum payments for a couple of years.

The Ken has learnt that one of the possibilities now being considered is to allow telcos to pay the AGR (adjusted gross revenue) dues over a period of 20 years. A source close to the government told The Ken that this could be done through bringing an ordinance (as parliament is not in session) to effectively overturn the Supreme Court’s judgement. The apex court had given the telcos a time frame of 10 years to pay their AGR dues.

The Department of Telecommunications (DoT) had originally submitted to the SC, with the cabinet’s approval, that the telcos could pay their AGR dues over a 20-year period. “If the cabinet agreed to a 20-year period and the court didn’t, the cabinet can always issue an ordinance,” the source said.

The government did something similar to overturn an SC judgement in the case of state governments’ right to make their own list of socially and educationally backward classes (SEBC) aka OBC. On 9 August, the government introduced a bill that aims to restore states’ power to make their own OBC list.

“In the same bargain, the government can also look at reducing interest rates (for AGR payments),” the source added. Because taking another look at the possibility of arithmetical errors in the computation of AGR dues is not in the hands of the government and is solely dependent on the court, the source quoted above said.

The government is also actively considering softening its stand on the one-time spectrum charge (OTSC) case which it has been contesting in the SC. Following the SC’s cancellation of 122 telecom licences, the earlier UPA government had introduced some rules.

These rules said that all operators holding spectrum of more than 6.2MHz per circle between July 2008 and December 2012 would pay a one-time market-linked price for additional spectrum. This was a retrospective move. Also, prospectively, the operators holding beyond 4.4MHz per circle were required to pay for duration starting from January 2013 till end of the respective licence duration.

Subsequently, telcos challenged DoT’s OTSC levy in the Telecom Disputes Settlement and Appellate Tribunal (TDSAT). In July 2019, the tribunal ruled that the government couldn’t levy OTSC retrospectively, potentially bringing down liability of telcos by 60% in the case. The government has challenged the TDSAT ruling in SC, which is yet to give its final judgement.

The government can now settle the litigation once and for all, the source said. In 2012-13, the DoT had issued demand notices for Rs 25,000 crore (~US$3.3 billion) from all telcos. Under the contested rules, Vi owes roughly Rs 7,000 crore (~US$1 billion) to the government. Airtel has marked Rs 5,590 crore (~US$751 million) as an exceptional item (for OTSC) for the year ended March 2021.

If Vi dies, Indian telecom effectively turns into a duopoly. And that’s something the government has repeatedly said, at least publicly, that it doesn’t want. Extending the timeline for payment of dues and reducing the interest rate charged on it seems to be the only way to keep Vi plodding along. It remains to be seen, however, if Vi’s promoters will change their stance and continue to invest in the telecom venture.

Telcos, Vendors, 5G and the great Indian media plugs
We underestimate the power of lobbying. In telecom, the industry moves on this muscle.

Look at what the telecom gear makers have managed to achieve: take their very nerdy 5G standards issue to the Quadrilateral Security Dialogue or Quad. The recent resurgence of Quad, which comprises the United States, India, Japan, and Australia, has been driven by the collective unease about China’s rise and the security threat it poses to the international order.

Now, to make a tiny Indian tech contribution to 5G standards—which is facing resistance in adoption by the global equipment makers community—a linchpin for diplomatic talks is akin to using a cruise missile to kill a quail. Apparently, the vendors and telcos sent a letter to the Department of Telecom raising the Quad angle and then selectively leaked it to The Economic Times.
Since The Ken has closely followed this particular tech development with detailed stories in 2019, 2020, and 2021, I can say that the ET article is ridden with factual errors. In fact, this whole saga has played out in the media, primarily in two business dailies, drip by drip—one plug after another. As a result, there exists no technical, open debate in the mainstream media that anyone can make sense of.

What is the issue at hand?
India recently allowed 5G trials. It is “encouraging” (not mandating) telecom operators to use 5Gi, a superset with Indian contribution. Initially, Reliance Jio and Bharti Airtel were in opposing camps. In the last fortnight, they’ve come to stand on the same side.

Global telecom vendors, on whom telcos rely not just for technology but also tech guidance, say 5Gi is not compatible with 5G. Indian tech developers say it is. Vendors say it’ll increase the cost; the Indian teams say it won’t.

This battle of wits and ego is playing out in business papers.

Incidentally, the official tech blog of the IEEE Communications Society points out the errors in the ET article, which is only a summary of the letter submitted to the DoT. IEEE is the world’s largest technical professional organisation. The blog’s closing remarks sums up the issue well:

It’s very disappointing that after all of TSDSI’s efforts to get 5Gi/LMLC included in the 1st official IMT 2020 RIT/SRIT standard (International Telecommunication Union-R M.2150) they couldn’t convince India telecom carriers or global equipment/chip vendors to endorse 5Gi/LMLC.

The second-order effect of this weary, media-facilitated tussle to deny Indian tech specifications in the global body 3GPP—which negotiates features for every generation of telecom—can be significant. For one, it sends the message to the Indian team that ‘slow down, your time has not come’. It’s fair to argue that following this experience, few academics in the country would want to push the envelope in areas dominated by tech giants. As it is, Indian academia is full of people who like to play safe and just publish papers to keep their tenure and promotions in order.

Secondly, if getting to the negotiating table is so hard for the big boys of telecom and the modestly equipped Indian team, then the forthcoming 6G negotiations at the ITU and 3GPP would get tougher. Even more mistrustful.

For the government, 5Gi is too high-tech and too low-priority in the larger scheme of things. There may be no champion for this in the government, but it is incumbent upon the leadership to bring closure to the 5Gi wrangle, one way or another. Trial by media is certainly not the right way. The Ken