The Indian telecom industry is going through a churn, as one witnessed by the losses posted by Vodafone Idea and Airtel on Thursday, due to the hit they took after the Supreme Court’s verdict on Adjusted Gross Revenue (AGR).
Telcos have to pay Rs 92,000 crore following the AGR order, with Bharti Airtel and Vodafone Idea stuck with the biggest chunk of dues. Neither company had provisioned for it in their books.
Vodafone Idea showed a massive net loss of Rs 50,921 crore for the last quarter and now, the company is appealing to the government to go slow on the collection of the old dues as well as to bring down the licence fees and spectrum charges. The company has now reportedly appealed to the government for relief.
“It is to be noted that our ability to continue as going concern is dependent on obtaining the reliefs from the government,” the company said in a statement when it announced its results.
The government of India is in an unenviable position. Having announced a reduction in corporate tax and taken on a revenue loss of Rs 1,45,000 crore, there is the threat of the fiscal deficit slipping from the 3.3% it had committed to maintaining for the year ending March 2020.
There is also a slowdown in the economy, due to which regular revenue streams are also showing signs of lower collections this year. Under the circumstances, the Supreme Court order has come as a huge bonanza to the government as it stands to collect over Rs 90,000 crore.
Only three telecom companies have been left standing in the telecom sector and the latest entrant, Jio’s dues are very less. State-run BSNL and MTNL also have to be nursed back to health.
Vodafone Idea and Airtel, which have also posted very poor financial results for the quarter told the government that if it does not step in and do something, their very survival is at stake. The government, already grappling with a lower GDP and economic slowdown may not want to see the telecom companies collapsing. The bad news will further dampen prevailing poor sentiments.
To be fair to the government, it has set up an internal committee to consider ways of reducing the blow to the industry without compromising on overall revenue implications. This could mean a deferred payment schedule for the old outstanding and some concessions going forward.