The next few days will, in many ways, set the tone for the telecom industry for the next year and beyond. Friday’s seismic developments mean that the telecom companies have to now scramble to around Rs 1.47 lakh crore to the government. And there must be no delay. The Supreme Court had rejected the plea filed by telecom operators seeking relief and a new schedule for the payments related to the adjusted gross revenue (AGR). Roughly, Bharti Airtel has to pay Rs 35,500 crore, Vodafone Idea has to pay around Rs 53,000 crore and Tata Teleservices will have to pay around Rs 12,500 crore as AGR dues, according to the calculations of the Department of Telecommunications (DoT).
Now that the Supreme Court has ruled, that leaves little room for telecom companies to seek relief. It is being reported by CNBC TV18 that Vodafone Idea is expected to pay the AGR dues in the next few days. Bharti Airtel is also ready to pay Rs 10,000 crore as first part of the payment, which is expected to be fully paid in the next few days. Public sector companies (PSUs) including GAIL (around Rs 1.72 lakh crore), Oil India (around Rs 48,000 crore) and Power Grid Corporation (around Rs 22,168 crore) will also have to pay the AGR dues.
The big potential fallout from this could be that we could see Vodafone Idea shut shop in India. The company’s top management had made it clear late last year itself that the company is in trouble, and could consider shutting down the India operations. The company posted a net loss of Rs 6,439 crore the quarter ending December 31, 2019—that is up from the Rs 5,004 crore loss posted in the same period in 2018. Whatever may have been the reasons that made Vodafone CEO Nick Reed apologise to the Indian government after the media reported his displeasure at the unsupportive regulation and excessive taxes on telecom companies. But here we are a few months down the line, and what Reed said looks very likely to happen.
If Vodafone Idea were to exit the Indian market, that would leave the critical telecom industry as a duopoly. Reliance Jio and Bharti Airtel. Come to think of it, India does not have a duopoly in pretty much any industry, let alone one as critical as telecom. The telecom business has grown exponentially in India over the past decade, also because competition ensured tariffs were competitive and service experience was considered important. With competition pretty much going, the remaining telecom companies will no longer have the incentive of keeping prices low to retain customers and attract new ones. After all, the customer wouldn’t really have many options, would they.
With Bharti Airtel, Vodafone Idea and others paying as much as Rs 1.47 lakh crore as AGR, will they have enough left in the tank to even think about 5G networks this year? Or even in 2021? At a time when 5G networks are already rolling out in developed countries, India risks being left even further behind.
Then there is the small matter of quality of services. Will the telecom companies that remain after this massive AGR pay-out, remain in a position to invest in infrastructure?
Then there are questions about the potential unemployment that could arise from this—companies may downsize, go slow on hiring and in case Vodafone Idea shuts down, there could be sudden loss of jobs for thousands. What about the ecosystem around the telecom industry, including start-ups and app developers who are heavily reliant on a healthy and functioning telecom industry to provide opportunities. And these span across domains—education, medicine, workplace, retail, entertainment, travel and more.
As we have said before, the very face of the telecom industry is potentially changing, and the next few days will define where we go.