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American war on Huawei succeeding as Europe joins anti-China ‘coalition’

The status of Huawei Technologies Co in the international market has reduced from a crucial component of British and French mobile networks to potential outcast after resistance and compromises began to give way to a relentless American campaign led by the White House.

Both France and the UK indicated this week that they were taking steps to reduce their reliance on the Chinese company — with the British government mulling over phasing out Huawei’s role this year. French cybersecurity agency Anssi imposed a waiver system that will severely limit its use.

A year ago, things were looking far more optimistic for the Chinese company. Britain’s intelligence and security committee had said last July that barring Huawei would make networks less resilient to malicious attacks. The committee’s reasoning was that it would reduce competition and leave the UK dependent on just two suppliers — Nokia Oyj and Ericsson AB.

UK Prime Minister Boris Johnson attempted a compromise in January, allowing carriers to use Huawei equipment to build their 5G systems. The precondition was to cap it at 35%. The British government decided not to use Huawei in sensitive network cores.

The Huawei decision comes at a crucial time for Britain. Johnson is trying to build what he calls a new “global Britain” following the country’s official exit from the European Union in January and is eyeing new trade deals with the United States and China. London finds itself torn between those two rival powers.

In 2015, then-Prime Minister David Cameron hailed a new “golden era” in Sino-British relations as he welcomed President Xi Jinping to London with a full state visit and banquet at Buckingham Palace.

Just five years on, tensions are rising fast over Huawei, China’s imposition of a new security law on Hong Kong, and Beijing’s handling of the coronavirus pandemic. Liu Xiaoming, China’s ambassador to Britain, gave a stark warning in an internet broadcast Monday. “We want to be your friend; we want to be your partner, but if you want to make China a hostile country, you have to bear the consequences,” Liu said.

American intervention

But the American pressure has only increased and European governments and carriers have found themselves having to choose sides between two world powers. President Donald Trump’s administration has piled on sanctions, making it more and more difficult for European carriers to access products from the world’s biggest maker of telecommunications equipment.

“Huawei’s R&D spending growth has been accelerating recently,” said Neil Campling, an analyst at Mirabaud Securities. “Their advances relative to the Western peers are significant, and so the US is using everything it can in its political power — whether that’s trade sanctions, official agreements, unofficial agreements — to try and slow China’s advances,” Campling said.

American war on Huawei succeeding as Europe joins anti-China 'coalition'

Huawei Vice President Victor Zhang urged the UK to assess the long-term impact of US sanctions before deciding to exclude the company’s products.

The American government, which wanted Europe to ban Huawei outright because of concerns that the Shenzhen-based company’s equipment was vulnerable to infiltration by Chinese spies, hit back.

Trump berated Johnson in a call after the UK’s announcement, a person familiar with the matter said at the time, and Vice President Mike Pence didn’t rule out that the clash could affect trade talks for post-Brexit Britain said.

Europe walks the American way

The fatal blow for Huawei’s relationship with Europe may have come in May when the US banned the company from sourcing microchips that use American technology.

The prevalence of chips that are made with or incorporate American technology caused New Street Research analyst Pierre Ferragu to declare in May that “Huawei has 12 months left to live”.

Those sanctions were so severe they prompted British security services to re-open their review of how secure and sustainable a supplier Huawei could be in national networks. That review has now been completed and sent to UK digital and culture secretary Oliver Dowden. He said they were “likely to have an impact on the viability of Huawei as a provider” and more details on the UK next steps will come soon.

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Article

Telecom Companies Can Survive Only By Increasing Tariff

India’s telecom is the cheapest service in the world, but if this business is to be kept alive then companies will need to change the situation to not only have healthy balance sheets with strong free cash flow but also able to invest in better technologies. Bharti Airtel and Vodafone-Idea, which were once giants in the domestic telecom industry, are suffering losses these days and the rest of the Indian telecom companies are in a bad condition too. They will remain the so for a long time. Bharti Airtel and Vodafone-Idea have not seen achchhe din since Mukesh Ambani-owned Reliance Jio entered the telecom sector. This year, none can say that they do not have AGR arrears. While the wrath of the Supreme Court could not have befallen them at a more inopportune moment, if these companies want to survive, they must collect more tariffs from the customers in what has to be a collective decision.

Motilal Oswal said in a recent report that every player needed an ARPU hike, VIL needed to survive and that RJio needed to justify its high valuations in recent investments while Bharti needed some leverage. Otherwise, these rivals would need to come together again, as they had done in December 2019. The near-term economic conditions of the last 10 years and history so far do not present a beautiful picture of the telecom industry. But any tariff hike is possible only if there is a collective effort on the part of all the companies. For, if only one of the charges is increased, millions of its customers will flee to the other two companies.

Coronavirus must have opened some new dimensions for many operators Because, at the time of lockdown, many such facilities were needed by the citizens, which only the telecom sector could provide. But the charges have not increased due to this. Rather, in this sector, the cost for the customer has moved in the opposite direction, making him enjoy less recharge, consolidation of dual SIM cards and fewer 4G off-takes due to the lack of counters or financial constraints.

There are other factors such as the apprehension among the players of the economy, such as a shrinking GDP and a decrease in people’s expendable income, causing the consumer to try to reduce their spending. At the same time, telecom operators are badly hit by an increase in average revenue per user (ARPU). Ironically, the companies do not want to raise at least one-fourth of the amount they should due to the aggravating conditions in the economy and the COVID situation. Vodafone-Idea needs to increase tariffs by 50% in order to survive, Reliance Jio may need to increase its ARPU by 40% and according to Bharti Airtel’s management comment, the firm will have to pay Rs 200 in the near term. And the need to get ARPU of around Rs and Rs 300 in the long term.

Finally, telecom companies must redesign their price plans so that they are capable of providing consumption-driven ARPU slabs. This will change people’s data needs and distinct requirements of different subscribers.

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Business Economy

Carlyle to acquire about 25% stake in Airtel’s data centre business

The Carlyle Group has decided to acquire about 25% stake in Airtel’s data centre business, Nxtra Data, for $ 235 million (about Rs 1,780 crore), the company said in a statement today. This will peg the enterprise valuation of Nxtra at $ 1.2 billion which is over Rs 9,084 crore.

On completion of the deal, Carlyle will hold about 25% stake in the business with Airtel continuing to hold the remaining stake of about 75%.

“Bharti Airtel and Comfort Investments II, an affiliated entity of CAP V Mauritius Limited, an investment fund managed and advised by affiliated entities of the Carlyle Group, today announced an agreement under which Comfort Investments II will invest $ 235 million in Nxtra Data Limited, a wholly owned subsidiary of Airtel engaged in the data centre business,” a Bharti Airtel statement said.

Also read: AGR: Socialist SC wants PSUs to be treated with kid gloves

“Rapid digitisation has opened up a massive growth opportunity for data centres in India and we plan to accelerate our investments to become a major player in this segment. We are delighted to have Carlyle as a strategic partner in this exciting journey, particularly given their experience in this industry, and look forward to working with them,” said Gopal Vittal, MD & CEO (India and South Asia), Bharti Airtel.

Neeraj Bharadwaj, Managing Director of the Carlyle Asia Partners advisory team, said, “India is set to become one of the largest markets in the world for digital services. Airtel, with its proven track record of solid execution and customer focus, is well positioned to leverage the potential growth of data centres in India. We look forward to collaborating with Airtel to unlock the full potential of Nxtra.”

Also read: Jio, with foreign buyers aplenty, raises Rs 60K crore

US-based Carlyle has prior experience in data centre ownership through investments in Coresite in the US and Itconic in Spain.

Nxtra, which is building multiple large data centres across India, will use the proceeds from the deal to scale up its infrastructure, the companies said.

India is seeing a surge in demand for data centres as more businesses choose cloud computing, and consumer demand for digital services such as smartphone entertainment continues to grow, they added.

Cloud and entertainment services represent the next revenue frontier for traditional telecom carriers like Airtel, as voice and data rates in India remain among the cheapest in the world.

Airtel’s local rival Jio, controlled by billionaire Mukesh Ambani, has a cloud tie-up with Microsoft, under which it will build data centers hosted on Microsoft’s Azure cloud.

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Business

BSNL, MTNL ordered to stop use of Chinese 4G devices

The Narendra Modi government has made a big decision today, shocking the Chinese market by banning the use of their 4G equipment in the Indian telecom sector. In view of national security, the government has today directed the Department of Communications and government telecom companies BSNL and MTNL to stop the use of Chinese equipment for the implementation of 4G.

Since private companies use this telecom infrastructure of BSNL and MTNL too, China is expected to feel a harder pinch.

The government has ordered BSNL and MTNL to abolish all tenders in this regard and the process to withdraw new tenders will be started soon. The government will not give any new tenders for 4G to Chinese companies and fresh tenders will be withdrawn.

The government is preparing a set of instructions to block Chinese equipment by private companies as well. This is a big initiative to reduce Chinese goods’ use in India. As a bonus, the step adds to Prime Minister Narendra Modi’s ‘Atmanirbhar Bharat’ (self-reliant India) campaign launched recently.

On the night of 15-16 June, a violent skirmish took place between the Indian Army and Chinese soldiers in the Galwan Valley of Ladakh region, in which 20 brave soldiers of India were martyred. 43 Chinese soldiers are also reported to have been killed in this conflict, but China has not given any official statement on this.

BSNL was ready already

“This (India-China skirmish) is a strategic matter involving national security, and whenever operators would be asked by the government to shun China-origin ZTE equipment, BSNL will be the first to comply with orders,” a BSNL source said.

Shenzhen-based ZTE’s India business has already shrunk, with BSNL being the largest customer servicing in as many as six service areas, while private players have already reduced their dependence on the Chinese company that also maintains only two circles for Bharti Airtel and five circles for stressed Vodafone Idea.

Early this year, the Chinese company has laid off a substantial workforce to cut operational costs following rising financial pressures.

The market for telecom equipment is Rs 12,000 crore, in which the share of Chinese products is close to 25%. People in this field say that if Bharti companies leave China and import from other countries, the cost will increase by 15%.

Private sector eager to boycott China too

The Confederation of All India Traders (CAIT) has given a call to boycott Chinese products too. Earlier, the confederation had urged the government to take some immediate steps such as cancelling the contracts awarded to Chinese companies immediately and framing rules for withdrawal of investment by Chinese companies in Indian startups.

CAIT national president BC Bhartia and national general secretary Praveen Khandelwal said that in view of the recent developments and China’s consistent attitude towards India, Indian traders have resolved to teach China a big lesson by reducing Chinese imports. He said that even though the traders’ trade is being imported from China, nothing will be ahead of their national interest and they have decided to stand in solidarity with the movement.

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Business

AGR: Socialist SC wants PSUs to be treated with kid gloves

The Supreme Court today, taking a socialist stand, expressed concerns over the government move to slap spectrum dues worth over Rs 4 lakh crore from PSUs as adjusted gross revenue (AGR)-based dues, but saw no problem in applying the same rule to the private sector telecom companies. It doubted the government’s plans for recovery of Rs 1.69 lakh crore spread across 20 years from the private telcos.

The Justice Arun Mishra-led three-judge bench asked the government to clarify in three days why it had raised demands of over Rs 4 lakh crore towards spectrum licence and user charges from PSUs. The court suggested this amount was introduced as an afterthought after the court ruling against other telcos such as Vodafone-Idea and Bharti Airtel.

The court asked the telecom companies to file affidavits on the instalments against their dues — and the securities they would offer to guarantee such payments over time — by 18 June when the court would reconvene to examine the issue again.

These private companies are Bharti Airtel, Vodafone Idea, Tata Teleservices and Hughes Communications. Out of these, Vodafone-Idea has said it would be unable to pay its dues because of its precarious financial state. Senior advocates Abhishek Manu Singhvi, Mukul Rohatgi, Arvind Datar and Kapil Sibal respectively represented Bharti Airtel, Vodafone Idea, Tata Tele and Hughes Communications.

Getting the AGR news from the Supreme Court, the Bharti Airtel stock at the BSE traded 2.6% lower at Rs 552.40 while Vodafone Idea plunged 13.2% to Rs 9.22 in the evening.

Justice Mishra said the government move to slap similar AGR dues for recovery from PSUs was “misuse” of its earlier ruling against the private telcos. He warned of action against the Department of Telecommunications (DoT) officials responsible for the move while seeking clarity on the move from Solicitor General Tushar Mehta who appeared for the government.

Justice Mishra said, “We will request you to withdraw the demand on PSUs otherwise we will take strict action. Outright misuse of our verdict. You are making a demand of Rs 4 lakh crore! This is wholly and totally impermissible. Every day I think about how our judgement has been used and misused.”

Telecom operators’ AGR dues

The solicitor general said that a one-time recovery from telcos would hit operations in the sector and send some into liquidation. The bench was not impressed. Also comprising Justices MR Shah and S Abdul Nazeer, the bench appeared disinclined to the suggestion. “Who knows what will happen in 20 years?” Justice Mishra observed, pointing out that this litigation had begun in 1999 and was yet to draw to a close.

Senior counsel Rohatgi, representing Vodafone-Idea, said that spectrum was the best security for the operator. “Licenses and spectrum were auctioned. We purchased them for thousands of crores. The intrinsic value of the spectrum will be the best security,” he told the court.

The advocate added that the total demand of Rs 50,000 crore plus interest and penalty cannot be furnished in bank guarantees. “We do not have enough money to pay our employees and meet our expenses,” he submitted.

Justice Mishra couldn’t be moved. “Find out what security can be furnished, personal property of directors. Else we cannot consider giving time,” the judge said.

Cash strapped Vodafone-Idea has warned that it would be forced to shut shop in the absence of any relief on its AGR dues, an estimated Rs 58,254 crore. The company has so far paid up Rs 6,854 crore.

https://www.sirfnews.com/if-agr-ruling-kills-vodafone-idea-10000-jobs-will-be-lost/

Singhvi, representing Bharti Airtel, said his client had paid 100% of its dues as per their calculations and sought time to file affidavits. He said that the company would confirm the remaining dues with the government and clear it.

Bharti Airtel has so far paid Rs 18,000 crore of the Rs 43,980 crore that the DoT had demanded. Tata Teleservices has paid Rs 4,197 crore of the Rs 16,798 crore worth of arrears.

Justice Mishra wanted to know who would take care of the dues if one of the companies went bust. “What if one of the companies goes into liquidation. Who will pay then? Are the telcos willing to give personal guarantees by their directors?” he asked.

https://www.sirfnews.com/agr-payments-from-telcos-enrich-govt-by-rs-8000-crore/

Court sympathises with PSUs

The judge questioned Solicitor General Mehta why the government made no demand against PSUs for 30 years. He remarked that the government fined the public sector companies “to make it easy for the private companies not to pay”.

The DoT has demanded Rs 1.72 lakh crore from GAIL India, Rs 48,489.26 crore from Oil India, Rs 22,062.65 crore from Powergrid Corporation of India, Rs 15,019.97 crore from Gujarat Narmada Valley Fertilizers and Chemicals and Rs 5,481.52 crore from the DMRC.

“Who authorised these demands to be raised against PSUs? PSUs should not be paying AGR dues, Such demands on PSUs are wholly impermissible” said Mishra. He asked if the solicitor general had advised the government to withdraw demands against PSUs yet.

Mehta defended the government, saying that the government was raising the AGR due bills as per the agreement with the PSUs. He added that PSUs had been a different set that discharged government functions and that they were different from their private counterparts.

“Kindly consider giving PSUs a different treatment from that of the telcos although they hold spectrum,” said Mehta.

The bench asked the solicitor general to file an affidavit on why the PSUs were charged and did not accept the SG’s request for a clarification. “We want them to file an affidavit. How could this be done by them? We will punish them,” said Justice Mishra.

Mehta said he would file an affidavit on why the government had raised dues against the PSUs.

In the previous hearing on 17 March, the apex court had scrapped self-assessment of AGR dues by telcos. But relieving the likes of Vodafone Idea, Bharti Airtel and Tata Teleservices, it had agreed to consider the government’s plea to allow carriers to stagger the payment of dues over a maximum 20 years.

In its application filed in the top court, the government has cited the risk of “adverse impact” on the economy, jobs and millions of consumers from the possible collapse of any of the telecom companies. It urged the court to accept its formula to receive the AGR dues over a period of up to 20 years.

The government formula for AGR recovery includes freezing interest and penalty components as of 24 October 2019 when the Supreme Court had pronounced the order expanding the scope of the AGR.

The AGR dispute: Editorial view

While worldwide, AGR is defined as the difference between a taxpayer’s total gross income and specific deductions, in India, companies challenged the government definition of what constituted their gross income. According to the DoT, the AGR must include all revenues (before discounts) from both telecom and non-telecom services. But the companies maintain that AGR should comprise the revenue accrued only from the core services and not dividend, interest income or profit on the sale of any investment or fixed assets.

By the time the government’s view prevailed, the AGR dues of companies had accumulated to big amounts. While the Narendra Modi government and advocates of private telecom companies have explained the impact of this repayment on the economy, there is no nationwide debate yet on why the PSUs should be exempted from this rule. Does being late in asking for the payment from GAIL India, Oil India, Powergrid Corporation of India, Gujarat Narmada Valley Fertilizers and Chemicals and DMRC change the definition of AGR?

Of course, a PSU is sustained largely on public money, which may make them deserve a kinder treatment by the state. But given that the Indian political executive barely recognises that business is no business of the state and pours in citizens’ money to pull out PSUs when they are in the rut, why should these government companies get an additional concession in tax recoveries? After all, their payments ease off the tax burden on the citizens of India.

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Business

Jio, with foreign buyers aplenty, raises Rs 60K crore

Jio has raised about Rs 60,000 crore within three weeks through separate agreements with three companies including Facebook. According to sources, two more companies from Saudi Arabia and the US are preparing for huge investment in Jio.

In the midst of a crisis-ridden world economy due to the global coronavirus pandemic, business giants have reached the brink of bankruptcy. But Reliance Jio, under the leadership of Mukesh Ambani, is adding about Rs 20,000 crore to its coffers every week.

According to sources, American private equity firm General Atlantic may invest Rs 6,500 crore in Reliance Jio. The agreement is likely to be concluded by the end of May.

Sources say that Saudi Arabia Public Investment Fund (PIF) also wants to buy a small stake in Jio. General Atlantic and PIF have so far refused to divulge anything about it.

Sources in Jio say that Reliance is pursuing a long-term target. They say it is a matter of pride for the country and the company if the leading global investor companies are so enthusiastic about investing in Indian startups like Jio.

Facebook was the first to invest in Jio. After it put in Rs 43,500 crore, Silver Lake announced an investment of about Rs 5,000 crore. Vista has invested Rs 11,367 crore in Jio.

Experts say that the strategic investment of these companies will help Reliance Industries reduce its debt burden.

“Jio added 4.9 million active subscribers, improving its active subscriber market share to 31.4% (up 38 basis points month-over-month), while Bharti Airtel/Vodafone Idea lost 1.7 / 0.3 million active subscribers with market share down by 30/15 bps MoM at 31.7 / 30.1%,” Axis Capital said in a report.

Other telecom companies are but in the doldrums. Vodafone Idea has been losing active subscribers since May 2018 when its combined active market share stood at 42.2%, Axis said.

ICICI Securities said active subscribers net add is expected to remain volatile due to SIM consolidation on steep increases in tariff in December 2019, muted new active subscriber addition on lockdown, and non-availability of offline recharge from March 2020.

Mobile broadband subscriber base in January stood at 654 million, which is 66.3% of the total active base of 986 million.

Reliance Jio mobile user addition in January was flat sequentially due to strong growth by Bharti Airtel, which increased market share to 24.3%, up 34 basis points (bps). “Mobile broadband subs addition for Bharti was strong at 4.4 million, considering the tariff hikes and RJio’s reintroduction of unlimited off-net outgoing calls,” ICICI Securities said.

VIL’s broadband subscribers dipped by 0.5 million to 118 million; this was disappointing considering the expansion of its 4G network coverage and benefits of network integration,”” the brokerage said.

Jio though is still leading with a mobile broadband subscriber share of 52.8% while Vodafone Idea has 20.1%, down 43 bps on month, data showed. The brand has been ahead of the competition even in offering special packages to its subscribers to meet the challenge of social distancing during the nationwide lockdown to break the coronavirus infection chain.

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Business

DoT works to resolve tech glitch to speed up tower clearances

A technical glitch in the telecom department’s online clearance system for setting up of mobile infrastructure could push back installation of some 50,000 towers and base stations by several months if not rectified soon.

Industry executives said the glitch has led to a backlog of over 100,000 applications as the clearances are now being processed manually. Staff availability issues because of back-to-back lockdowns have compounded the problem.

This comes at a time when carriers are trying to boost network capacities to meet a surge in data demand as millions working from home amid the coronavirus crisis.

Also read: Niti Aayog: Aarogya Setu app registers 9 crore downloads

Telecom operators need approval from the standing advisory committee on radio frequency allocation (SACFA) on the height and location of towers and base stations they plan to install.

The Department of Telecommunications’ (DoT’s) wireless planning cell (WPC), the Airports Authority of India and the Joint Communications & Electronic Staff in the defence ministry have representatives in the panel. The approval is a must to ensure tower sites and base stations don’t fall in restricted zones near airports and don’t cause any radio interference.

“The sudden move (in the SACFA approval process) from online to manual mode due to unforeseen events on the WPC website has led to a backlog in approvals for applications submitted, and the manual process has become more difficult due to the COVID-19 outbreak,” Rajan Mathews, director general of Cellular Operators Association of India (COAI) said.

Also read: India to operate 64 flights to bring back citizens stranded abroad

The manual approvals process, he said, has been hobbled by the restriction on movement of personnel due to the lockdown.

The COAI represents Reliance Jio, Bharti Airtel and Vodafone Idea. Email queries sent to these companies remained unanswered till as of press time.

Mathews, though, said that COAI has discussed the issue with DoT, which in turn has put in “substantial efforts” to resolve the matter quickly.

Brokerage CLSA had recently said that overall data traffic has increased by nearly 25% after the Covid19-induced lockdowns, with majority of corporate staff working from home.

In the face of this increased demand, telcos have urged DoT to speed up the clearance process to 30 days, from about 90 now, to hasten network deployment. They have also recommended escalation mechanisms if SACFA nod timelines are not met.

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Business

Saudi, American firms eye stakes in Reliance Jio

Two more firms are eyeing a share of Reliance Industries Ltd’s $65-billion digital unit JioPlatforms, according to Bloomberg News, setting them up to be a part of a growing list of firms that have recently invested in the Indian company.

U.S. private equity firm General Atlantic is considering investing about $850 million to $950 million in the Mumbai-based company, a Bloomberg report.

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Saudi, U.S. firms eye stakes in Reliance’s Jio

Two more firms are eyeing a share of Reliance Industries Ltd’s $65-billion digital unit Jio Platforms, according to Bloomberg News, setting them up to be a part of a growing list of firms that have recently invested in the Indian company.

Reuters May 09, 2020, 08:18 IST

Two more firms are eyeing a share of Reliance Industries Ltd’s $65-billion digital unit JioPlatforms, according to Bloomberg News, setting them up to be a part of a growing list of firms that have recently invested in the Indian company.

U.S. private equity firm General Atlantic is considering investing about $850 million to $950 million in the Mumbai-based company, a Bloomberg report. 

The deal could be completed as soon as this month, though no agreement has been finalized and plans may change, it added.

Saudi Arabia’s Public Investment Fund (PIF) is also considering to buy a minority stake in Jio, Bloomberg said in a separate report.

General Atlantic declined to comment on the report, while Jio and PIF did not immediately respond to Reuters request for comment.

Hours earlier on Friday, Reliance Industries announced a $1.5 billion stake sale in Jio to Vista Equity Partners, the third deal in just over two weeks.

The conglomerate cut a $5.7 billion deal with Facebook for a 9.99% stake in Jio on April 22 and a few days later, it secured a $750 million investment from private equity firm Silver Lake.

Together the three deals will inject a combined $8 billion in the telecoms-to-energy group and help it pare its debt.

Vista’s investment gave Jio an equity value of 4.91 trillion rupees ($65 billion) and an enterprise value of 5.16 trillion rupees, said Reliance, controlled by billionaire tycoon Mukesh Ambani.

The potential investments from New York-based General Atlantic and the Saudi sovereign wealth fund, which manages over $300 billion in assets, would inject money on top of the $8 billion which Jio has already raised.

Saudi’s PIF has been buying minority stakes several companies. Last month, it disclosed an 8.2% stake in coronavirus-hit Carnival Corp, sending the cruise operator’s shares up nearly 30% higher.

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Economy

ICRA says AGR stressing, confusing telecom industry

Investment Information and Credit Rating Agency (ICRA) of India Limited today said there was palpable precariousness in the telecom sector following the plea of the Department of Telecommunications (DoT) in the Supreme Court to prolong the period for the payment of this tax to 20 years. “The telecom industry is facing considerable uncertainty owing to the adjusted gross revenues (AGR) related dues that are required to be paid as per the Supreme Court order,” the firm in a statement said.

The investment information and credit rating agency said the players in this sector were confused about the timelines and financing of payments due to the statutory AGR-related dues. In October 2019, the apex court, while addressing the old dispute between telecom companies and the government, had not only upheld the demand of the DoT to include non-telecom service revenues in their AGR but also slammed the industry for dragging its feet on the issue. The judges had made some observations, which suggested they were exasperated.

Vodafone-Idea owes the highest amount of nearly Rs 53,000 crore to DoT. Bharti Airtel owes Rs 35,000 crore. Tata Teleservices Rs 14,800 crore. Vodafone-Idea has so far paid Rs 6,854 crore, Airtel Rs 18,000 crore and Tata Teleservices Rs 2,197 crore to DoT.

In fact, Vodafone had almost decided it would wind up its business in India.

The pressure to pay up their AGR dues has stressed the telecom firms financially, ICRA observed.

The DoT had in March sought the Supreme Court’s intervention to allow the 20-year term for AGR payment by the struggling companies. But the court hasn’t taken up the issue yet. It is hearing limited cases via video conferencing since the coronavirus disease (COVID) outbreak in the country.

ICRA says the industry was recovering this year after witnessing cutthroat competition in quality of services and pricing as well as increased debts. This growth, the agency said, was because of the steady average revenue per user improvements, initiatives of deleveraging and moderation in CAPEX intensity.

In December last, the firms had increased their tariff to overcome continued financial woes even as this led to customers dumping the services.

On the positive side, ICRA said the ongoing nationwide lockdown due to COVID-19 would have minimal impact on the telecom services. It believes while there is pressure on revenues due to limited customer addition and lack of physical recharges, the increased mobile usage on account of the ‘work from home’ regime is more than making up for the loss.

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Business

DoT, FM, NITI officials meet to rescue telecom industry

Officers of the Department of Telecommunications (DoT) met with those from the Ministry of Finance and NITI on 23 February to discuss urgent relief measures to revive the telecom industry, where every company is struggling to pay its adjusted gross revenue (AGR) dues. In the meeting of over an hour, the officers mulled over options that the government has to provide some respite to the service providers, which include not only private companies like Vodafone-Idea and Bharti Airtel but also state-run companies like BSNL and MTNL (the government has sent AGR notices to some non-telecom companies too).

The DoT officials did not disclose the minutes of their Sunday meeting, held at a time when the telecom companies owe a whopping Rs 1.47 lakh crore of unpaid dues to the DoT. This includes Rs 92,642 crore in unpaid licence fee plus Rs 55,054 crore as outstanding spectrum usage charges. Bharti Airtel and Vodafone Idea Limited owe about 60% of the estimated dues. This includes interest and penalty for late payments.

While Bharti Airtel, which has raised about $ 3 billion in the last few months, may have sufficient funds to tide over the AGR crisis, Vodafone-Idea, having paid only 7% of its due of Rs 53,000 crore, is in deep trouble.

The DoT wishes to strike a balance between complying with the Supreme Court order on AGR dues, a source said. This will, he said, ensure the sector stays healthy and the consumer’s interest is safeguarded.

Vodafone-Idea chairman Kumar Mangalam Birla met government officers last week to plead for breathers whereas Bharti Airtel Chairman Sunil Bharti Mittal had on 20 February made an appeal to the government for a reduction in taxes and levies to extricate the sector from an “unprecedented crisis“.

DoT trying to avert monopoly

The government does not want a monopoly that a probable shutting down of Vodafone-Idea will create in the market. It wishes to retain the present three-plus-one model of competition (three private and one public sector company).

The Supreme Court had in October 2019 upheld the position of the DoT that revenue from non-core businesses must be included in calculating the AGR dues. A company pays a share of this as licence and spectrum fee to the state.

The apex court on 14 February rejected mobile carriers’ plea for extension in the payment deadline. It ordered all of them to deposit an estimated Rs 1.47 lakh crore worth of dues for spectrum and licences by the midnight of that very day, failing which it would initiate contempt proceedings against top executives of these companies.

Telecom companies in India are struggling for reasons other than AGR. Their losses, debt and additional liability are mounting. They may default on existing loans.

Vodafone-Idea has paid up only Rs 3,500 crore in two parts. Out of its estimated liability of over Rs 35,000 crore, Bharti Airtel has paid Rs 10,000 crore. Tata Teleservices has made a payment of Rs 2,197 crore. The Supreme Court ruling of 24 October shot their liabilities through the roof.