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Three Reasons Why The Indian Telecom Sector’s Troubles Went From Bad To Worse In The Last 24 Hours

What started out as Reliance Jio’s tariff war against Airtel and Vodafone-Idea has now turned into a full-blown crisis.

Now, an additional penalty of ₹3.2 crore is being levied against them for call drops between September 2019 to June 2019.

What’s more, the Department of Telecommunication (DoT) is looking into additional AGR dues that network operators they owe on behalf of the companies they acquired. Airtel, for instance, might have to pay its own AGR dues as well what is owed by Aircel and Videocon Telecommunication, both of which declared bankruptcy.

Bharti Airtel Chairman, Sunil Mittal, has asked the government to lend a ‘sympathetic’ view in light of recent events. According to him, it’s essential that at least three players remain in the segment. “It’s a matter of survival,” he said after a meeting with the Telecom Regulatory Authority of India (TRAI).

Despite the industry’s many appeals, no help seems to be on the horizon. Even banks don’t want to lend network operators more money fearing that it will never be paid back.

Call drop charges

Sanjay Dhotre, the Minister of State for Communication, told the Parliament that network operators in India owe the government ₹3.2 crore for call drops over a span of 12 months — more than half of which is from Vodafone-Idea amounting to ₹1.76 crore.

Reliance Jio hit a big of good luck and was the lowest offender with fines of ₹6.5 lakh, while Bharti Airtel owes ₹43 lakh.

Charges of ₹47.5 lakh were also imposed against government owned Bharat Sanchar Nigam Limited (BSNL).

AGR dues might blow up even further

The telecom industry’s AGR dues currently stand at ₹1.47 crore after the Supreme Court order widened the definition of AGR to include non-core items. But that number might set to increase if acquired companies are taken into account. “DoT is looking into the spectrum trading deal between Bharti Airtel and Videocon Telecommunications and dues that need to be paid,” a government official told ET.

Videocon Telecommunications shut down in 2017 after which it was picked on the cheap by Airtel. According to estimates, it owes the government around ₹1,300 crore in licencing fees, SUC, interest and penalties. DoT is also looking into Airtel’s acquisition of Aircel, which owes a massive ₹10,230 crore in dues. But the Mittal-owned enterprise might not have to pay for all of it since most of the debt comes from Aircel’s 2G and 3G airwaves — and Airtel only picked up the 4G spectrum.

The government though has said it can’t provide AGR relief unless directed by the court. And since Airtel has been using their spectrum for 2G and 3G services, it is liable to pay the impending AGR dues as well.

Help doesn’t seem to be on its way

The rating company, ICRA, maintain a ‘negative’ outlook for the Indian telecom industry. According to it, the recent increase in tariffs won’t be enough to offset the blow of AGR dues.

Banks are also backing away from extending any more loans to network operators to help them pay off their debt.

There is no respite on the horizon either, the government has ruled out any possibility of lowering the fines which are owed — despite the 7% drop in revenue  for operators over the past year.

Reliance Jio, Airtel and Vodafone-Idea have till December 13 to clear any doubts — and have been warned against any delay in the payment of dues.

“Any issues should be pointed out in the comprehensive representation to be submitted, but in no case, the self assessment and payment of dues are to be delayed,” said the letter issued to telecom operators by the DoT. – Business Insider

 

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