Telecommunication is one of the boomed markets flourishing at the fastest pace and has also played a major role in the growth of the Indian economy. This connectivity revolution powered the technology giants to reach hundreds of millions of Indian youth to get into its grid creating a golden opportunity to improve their prospects.
Then why the Indian government is in an urge to push back the telecom businesses into debts or rather say in the state of bankruptcy? Why can’t it let the sector to be flourishing healthily?
This week’s one of the three major players, Bharti Airtel Ltd postponed its announcement of the financial year 2019 which is not at all a good sign as it reported a loss in last quarter ending in June. The reason behind the delay is an announcement from the Supreme Court. It says, Bharti Airtel and other legacy telecom companies including Vodafone Idea Ltd have to pay billions of dollars to the government. The decision is a result of long –term disputes between the sector and state on how to calculate revenue of government which it should receive as a part of the fee for handling the telecommunications spectrum. According to the telecom sector, the revenue from the use of the spectrum should be charged but the government wanted a share in everything including, revenue from rent.
The Supreme Court has finally ordered the companies to pay the whole amount which includes not only the dues but a hefty amount with interest on both in 3 months. The total amount comes $13 bn out of which Vodafone idea owes $4bn and Bharti Airtel around $3bn which is no doubt a hard one to pay.
Vodafone Idea’s debt in March 2019 was $14 billion and Airtel’s was over $15 billion. All thanks to Spectrum as some part of the amount have already been shelled out. A great new for drafters of the budget and the bad news for investors in the sector and overall growth is the government changed an earlier policy of subsidizing the spectrum to the one involving auctions and would maximize the amount that it receives as revenue. The entry of cash-rich new entrant Reliance Jio Infocomm Ltd with the 4G spectrum that had been assigned for data to be used for voice services as well is good for consumers but has added burden on Jio’s competitors.
The government after its attempt to grab even a single rupee from the telecom sector for spectrum, imposed adverse regulation and then appealed legal decisions to the Supreme Court has now decided to convene a panel of senior bureaucrats to consider how to ease the financial stress for telecom companies. The government is also planning to pay $6 bn to relief dying state-owned telecom companies and assign them with a 4G spectrum at an administrative cost.
Watching the current scenario of the Indian telecom industry, it is really hard to see investors entering the market and playing in this stony field. Past investors have already set alight by state action. The UAE’s Emirates Telecommunications Group Co. PJSC, Norway’s Telenor ASA, and Russia’s Sistema PJSFC cancelled their investment of $2.5 bn after Supreme Court cancelled their licenses all together a few years ago, followed by corruption allegation that has not been confirmed by the courts. As the Indian government unilaterally cancelled the investment treaties, foreign investors cannot even appeal to international arbitration anymore. The dream of 5G that could power India’s future looks unlikely soon.
It seems India’s experienced politicians think foreign investors cannot go anywhere and every sector is a cash cow for their welfare. The aviation industry has already suffered a lot by state action; it looks like the actual backbone of the realistic growth strategy of India- Telecom is next in the queue.
On one side the government is boasting about the ease of investing in India and politicians here are making things difficult to survive in this dirty environment.