Telecom: A Death Judicially Ordained–Economic Times

The Supreme Court has cracked the whip on telcos for not paying the adjusted gross revenue (AGR) dues of Rs 92,000 crore. Some telecom circle authorities reportedly issued notices for payment by midnight Friday. The Red Queen famously believed in six impossible things before breakfast.

Can’t the department of telecom (DoT) believe in just one, late in the evening? What is possible can be listed, though: civil servants can protect their backsides by asking telcos to make impossible payments, Vodafone Idea can fold up, unless Aditya Birla chips in with some Rs 19,000 crore, now that Vodafone has declared it would not put fresh money into the Indian arm; without a fellow operator to share costs with, Airtel would see its costs go up and raise tariffs, all the more easily, now that the sector would turn into a duopoly with Reliance Jio. It is also possible that investors would see Vodafone Idea’s plight as the real index of the ease of doing business in India.

How did we come to this pass? When Indian telecom migrated from a fixed, and unaffordably high, licence fee to licence fee as a share of revenue in 1999, telcos were shown a draft condition that said sector regulator Telecom Regulatory Authority of India (Trai) would specify what kinds of revenue would be deemed shareable.

When the actual licence was issued, the condition said a share of gross revenue.

This went into dispute in 2003. Since then, NDA 1, UPA 1and 2, and NDA 2 have pursued the licenser’s claim to a share of aggregate revenue, regardless of whether the revenue was derived from exercise of the telecom licence or not. In October 2019, the Supreme Court ruled that telcos must pay a share of their gross revenue, as that is what they signed on to. This judicial fixation on form over substance took telcos by surprise. They sought a review, which was dismissed, they pleaded for time to pay up, which has now been turned down.

Survival of a competitive telecom market, adoption of 5G, the future of digital India — all are up in the air. Only brave government policy can save Indian telecom. Another impossible thing? For the nation’s sake, we should hope not.

This piece appeared as an editorial opinion in the print edition of The Economic Times.
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via Telecom: A Death Judicially Ordained

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