The Centre must expedite the process of finding a time-bound resolution and long-term-impact policy decision to address the industry’s woes
One of India’s last surviving telecom operators Airtel has deferred release of its audited second quarter results. Almost all banks which have huge exposure in the telecom sector have their senior executives in a huddle. The reason for all this mayhem is a Supreme Court (SC) ruling which has suddenly sounded a death knell for ‘incumbent surviving’ operators such as Airtel and Vodafone Idea.
Cut to seven years ago when the apex court decided to scrap 122 telecom licences following a series of mind-boggling ‘notional’ loss numbers and a ‘circus of scams’ playing out in the national media.
The result, as widely reported in many sections of the media, ensured some well-reputed international telecom operators like Malaysia’s Maxis, Norway’s Telenor and Russia’s Sistema, made an inglorious exit from the country. This was after having sunk thousands of crores to build a world-class telecom infrastructure and service industry at tariffs which were the envy of the world. Top bureaucrats, who were haunted for putting their signatures on political decisions, left a yawning hyphenated format for successors to delay decision-making at the cost of nation-building, lest ghosts strike back. And the sector started borrowing heavily from banks, jeopardising their stability in the long-term.
Today, the telecom sector (with three players) has a total debt of Rs 3.9 trillion, sagging balance sheets with no signs of recovery for the next few quarters, below-cost consumer tariffs and almost defunct State-run telecom operators to save from going bust. Add to this the ‘Digital India’ dream built on JAM (Jan Dhan, Aadhaar and Mobile) basic framework, which has started to translate into on-ground success stories.
Wireless telephony is fueling billions of buy-ins on e-commerce platforms, terabytes of content in the form of films, music being downloaded on the go and ensuring in many cases last-mile delivery of essential Government services in a faster, transparent way. A citizen’s unique identity, even for law enforcement purposes, is mostly the ten digit mobile number.
Therefore, what does the additional burden of nearly Rs 92,000 crore (with penalties and interests spread over more than a decade) mean for this sector? Certain quarters have made some interesting observations on the mess in the sector. To begin with, as one of the leading Chief Executive Officer’s (CEOs) of a top home-grown telco was allegedly heard saying, “We would have had better returns on our investments if we had simply put all our money in fixed deposits.” Others found it ironical for the apex court to rule in the Government’s favour almost concurrent with the World Bank declaring India to be a more attractive destination for “doing business.”
The financial stability of the sector was being questioned even before the ruling came. Fears were raised on the exit of one more major player/investor, Vodafone from India, which has recently undergone a merger with the number three player in the market, Idea. Back of the envelope calculations suggest nearly five lakh job losses in telecom and ancillary sectors as cash-starved investors have gone for massive restructuring, if not looking at exit chutes. Fresh investment in much-needed rural regions have almost dried up, impacting connectivity in far-flung and in some cases border posts.
Is this where, those in the corridors of power, would like the country to head, set, as it is, amid a global economic downturn? Does the Indian telecom sector need an electric chair at this juncture, short-circuiting the life of the financial sector?
The answers, for this highly-regulated sector lie with the Government, which has to get the disrupted networks back in shape. The telecom sector for years has been arguing for rationalisation of levies, duties and taxes. One key bone of contention has been spectrum usage charges levied along with revenue share, topped up with the Goods and Services Tax (GST). The result is that for every hundred rupees pumped in by investors, nearly 45 goes into the Government’s kitty in way of different taxes. Second, ghosts of “notional loss” continue to haunt and the Government feels airwaves in any bandwidth are a potential gold mine to autocorrect the fiscal deficit.
Yes, with the recent hue and cry, the Government has been taking cognisance and recently constituted a committee of secretaries, monitored almost from the Prime Minister’s Office, to find a solution to save the sinking sector. The appeal is to expedite this process and have a time-bound resolution and if need be, co-opting some members of the judiciary, arrive at a consensus long-term-impact policy decision. Restoring the faith of existing investors, while allowing market voices to take the lead, will enable a revival in the sector.
(The writer is a policy analyst)