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TELECOM TROUBLES


Posted on 24-Jan-2020 Comments  0

Telecom troubles

Telecom sector becomes the theater of the absurd

The telecom troubles are far from over and nothing really happened on the 23rd January, which was the deadline for AGR payments. The DOT has asked the courts to be lenient with the telecom firms but the telecom story is gradually becoming a case of the theater of the absurd. Here is why.

What happens to Vodafone?

The single largest AGR liability is on Vodafone as it needs to shell out Rs.53,000 crore. The amount is disputed and Vodafone has accepted only Rs.44,000 crore, but that is still a big amount. There is no way Vodafone can afford to pay that kind of money and stay solvent. It is time to bite the bullet. The DOT either gives them deferred payment options or the government must be willing for the insolvency of Vodafone Idea. That will be a big hit!!

What is Bharti waiting for?

To an extent, the telecom companies do not have a strong case. The AGR amount was much smaller 15 years back when it should have been paid. In its misplaced confidence, the telecom companies neither paid it, nor provided for it. Of course, timing of the order was bad as it came in the midst of the price war. The real problem was that the ambiguity over AGR allowed the telcos to grow their market cap by borrowing heavily. Bharti must show affirmative action and settle the issue quickly.

What took them so long?

The question that comes  back to haunt us is why the government took so long. Most of the telecom companies that need to pay huge amounts are either insolvent or they have been merged. The DOT should have forced these telcos to transfer the AGR dues to an escrow account at the time of approving the merger. In all the above cases, the DOT could have asked telcos to keep aside a portion of their revenues in an escrow account. That would have made the situation look less absurd that what we are getting to see today. 

Real theater of the absurd

But the real theater of the absurd is playing out in the non-telecom companies. The DOT has sent AGR notices to companies like GAIL, Oil India and Power Grid. OK, to be fair, all these companies had applied for and had been allotted spectrum in the past. Now DOT wants companies like GAIL and OIL to also pay AGR charges on their oil and gas revenues since the Supreme Court order has extended to revenues beyond telecom also. That is what is making the DOT the theater of the absurd. When things appear too absurd, even the telecom companies that need to legitimately pay the AGR, are taking it easy. That is a dangerous trend! DOT must quickly leave out the non-telcos and push telcos to pay AGR in a time bound manner with concessions! 

Also read FISCAL DEFICIT here!


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