A level playing field: Case-by-case treatment in telecom should be avoided

Vodafone Idea (Vi) is hopeful that the government, which holds 49 per cent in the telco, would look at a long-term solution to its pending dues linked to adjusted gross revenue (AGR). The confidence, expressed at a recent earnings call, is based on the latest Supreme Court decision allowing the Centre to reassess the telco’s AGR up to FY17. While the court has permitted the government to review the entire AGR dues following the telco’s concern over calculation errors, there should not be any special dispensation for one company. The focus should be on a uniform policy for the telecom sector. A case-by-case treatment of entities could go against the spirit of level playing field and risk triggering legal complications.

 

This is not the first time that the Union government is considering a relief measure for the financially stressed telco. In 2021, the Centre had approved a package for the sector to prevent a duopoly situation. In business, duopoly is typically seen as anti-competitive, and from that perspective, the government had offered a relief package for the financially stressed sector at that point. As part of the package, in 2023, the government converted Vi’s interest dues, worth ₹6,133 crore, into equity of around 33 per cent. Subsequently, the Department of Telecommunications (DoT) converted another ₹36,950 crore of Vi’s dues, pushing the government equity in the telco to 49 per cent. An additional equity of just above 1 per cent would make the Union government a majority shareholder in the telco. Until recently, government representatives have maintained that there will not be any further conversion of Vi’s debt into equity. This stand should not change. In fact, the government has the responsibility of turning around the two state-owned telcos — Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL). This itself should help the sector to steer clear of a duopoly situation. 

Indeed, Vi needs a fix for its financial liabilities, which are estimated at around ₹2 trillion. Of this, AGR accounts for ₹79,500 crore. The telco made efforts to raise funds in the past and now needs to go all out in that direction. Vi, along with other telcos, must also pay attention to rationalising tariffs so that their monthly average revenue per user (Arpu) turns healthier than what it is now. Vi’s Arpu, a key metric that describes the financial viability of a telco, has shown some improvement in the September-ended quarterly result but is much lower than that of its rivals — Airtel and Jio. 

Telecom, as an important consumer-facing industry, needs to regain its robustness in the Indian market. Not too long ago, the Indian telecom market was a destination for several foreign investors. For that to happen again, the government should play the role of a facilitator for businesses by eliminating red tape and framing easier rules. With the sector looking to expand into newer areas such as 6G as well as satellite broadband, it will be looking to the government as an enabler. This would help the telecom ecosystem grow and compete on the world stage. Waiving financial dues and providing relief packages can serve short-term purposes, and may not go a long way in strengthening a sector. Rather than trying to prevent a duopoly scenario for the sake of it, the government can review the levies and duties it charges telcos. Such an approach can go a long way in fixing a systemic problem.