Telecom companies are seeing some desperate times as can be witnessed by the kind of statements being issued by the top most officials from the organisations. If it was Kumar Mangalam Birla, Chairman of the Aditya Birla Group saying last week that Vodafone Idea will have to shut shop if the government does not intervene, it was the turn of Sunil Mittal of the Bharti group to speak extensively on the bleak scenario the industry is confronted with.
“The situation is dire — it is a matter of survival for everyone. Vodafone (Idea) is in losses, Airtel is in losses, (state-owned) BSNL (Bharat Sanchar Nigam Ltd) is in losses,” an Economic Times report quotes Mittal as saying.
Mittal pointed out that if the companies end up having to make AGR payments to the government and continue to operate under the current loss-making regime, the entire telecom industry could collapse completely. He is hoping that the Supreme Court will see reason and revise its order so that whatever are the genuine dues can be paid and the issue settled.
To recap, the government said that as per the original licence terms the licence fee and spectrum usage charges of around 8% will be charged on the ‘adjusted gross revenue’ or AGR. This means a company holding a telecom licence will be liable to pay the fees on the total revenue earned by the company whether it is from the telecom operations or other business conducted by the same company. The Supreme Court says this is correct.
Mittal says the effective rate of tax for the industry is 30%. Mittal says this is like sin tax, which is how the high rates of taxation are explained on goods like alcohol and cigarettes. The other concession Mittal and the whole industry is seeking is from the TRAI to fix a higher floor price for telecom services. He says there is need to raise the average revenue per user to at least Rs 300 for the companies to stay viable. The figure is below Rs 200 now and Mittal says TRAI could allow companies to charge higher minimum tariffs to lift the ARPU to at least Rs 200 to start with.
Without naming Reliance, Sunil Mittal says one company which has endless financial resources has entered the market in 2016 and disrupted it completely resulting in the bleeding of all three operators, Airtel and Vodafone Idea in the private sector and BSNL/MTNL in the public sector. He says for a vast country like India, there is a need to have at least 4 telecom operators. For that to happen here, the companies have to survive and grow. He has cited the examples of the US and China where there are four and three operators respectively. He feels India should settle for three operators, Airtel, Vodafone Idea and Jio in the private sector and BSNL/MTNL (possible a merged entity) in the public sector.
Sunil Mittal and the other telecom players are now fervently hoping that the Supreme Court will modify its order and the government will step in and help telcos come out of the current situation.