It is time for the DOT to be reasonable with telecom companies
The Supreme Court pulled up the DOT and the government for unreasonable demands on non-telecom PSUs forcing the government to retract. But the fight may have just begun for the telcos.
Non-telecom PSUs are exempt
Since September last year, the DOT had conveniently expanded its definition of AGR payees to include all companies that had been allocated spectrum at any point of time. This led to unreasonable demands made to companies like REC, Oil India, GAIL etc. For most of these companies, the spectrum was just a marginal allocation and expecting them to pay AGR dues was preposterous since they were not in the core business of telecom services anyways. Government has now confirmed that 96% of such dues will not be charged. That should put the first issue to rest.
Bharti may have a smoother ride
Bharti has already paid Rs.18,000 crore of AGR dues and has furnished bank guarantees for another Rs.10,000 crore. Bharti has asked for another 20 years to pay the remaining dues but even if that time period is shortened, it may not hurt Bharti Airtel too much. It has monetized chunks of its assets in Africa and plans to shortly monetize its tower assets too. The sharp rally in the stock is indicative that the markets does not see too much of a risk for Bharti Airtel. However, idea may be a different ball game.
Vodafone Idea could be an issue
The problems for Vodafone idea are a lot more acute. It has paid Rs.6000 crore in AGR dues till date and has the cash to pay up another Rs.6900 crore based on March cash balance. That will still leave a gap of Rs.40,000 crore for Vodafone Idea to fill up. That looks very unlikely considering present cash flows. The amount assessed as AGR dues by Vodafone Idea is much lower than what is claimed by the DOT. Here, the DOT and the government will have to take a call. Insisting on the full sum would only push the company into a solvency crisis. What exactly is the way out?
Time for DOT to be flexible
Let us face it; the AGR dues are actually payable by the telecom companies even through the amount can be disputed. That message has been clearly sent out by the government and the DOT. It is time for the government now to be a lot more flexible in this regard. The telecom industry has already consolidated down to just 3 companies and the last thing the government wants is to convert the industry into a duopoly. The best that the government and DOT can do is to charge the AGR but be more flexible on interest and penalty. After all, telecom sector is on the throes of a big digital boom and the government would be the big beneficiary of booming revenues. Why kill the goose that still has the potential to lay golden eggs?
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