India’s largest telecom, Vodafone-Idea is near to shutting down its services, and the government isn’t really helping.
How Did It Come To This Point?
Jio came in 2016, disrupting the telecom sector with free data and unlimited calling. People began to shift to Jio because it was cheaper, and it resulted in predatory pricing across all major carriers.
Many carriers shut down because they could not manage to compete. From 12 operators in 2010, we are just left with 4 in 2020, which is really concerning.
Vodafone-Idea has to pay around ₹50,000 crores in AGR (Aggregate Gross Revenue) dues, a huge sum indeed for a company which is already bleeding in losses. Airtel also has to pay around ₹35,000 crores to the government.
What Is AGR?
AGR is the basis on which the Department of Telecom calculates levies payable by operators. Basically, it is a metric calculated from a company’s gross revenues and is used to determine the levy that be imposed on the income
The AGR issue is a 14-year-old case that had mobile operators locked in a legal battle with the government over the definition of of the term.
While the telecom providers insisted that AGR should only include revenue from core operations and that other sources should be excluded, theDepartment of Telecom(DoT) maintained that AGR also embraced non-core revenue from the sale of assets, interest on deposits, rental income and such like.
Ending this legal tussle, the Supreme Court on Oct 24, last year rejected telcos’ definition of adjusted gross revenue(AGR) and held that telecom service providers have to pay now fines and penalties on the unpaid fees, other than termination fee and roaming charges.
Paying The Dues
The Supreme Court has told the companies to pay the amount immediately. Airtel said we can deposit ₹10,000 crores for now immediately. Vodafone said we can deposit ₹3,500 crores as of yet, but the court rejected.
What if this law is implemented?
GAIL (Gas Authority Of India) who once installed optic fibres along with gas pipelines thinking they’ll also be able to provide telecom services to India, will have to pay around ₹1,72,000 crores, even though they only might have used those lines for internal company communication only.
Oil India would have to pay ₹48,000 crores.
Power Grid Corporation would have to pay ₹22,000 crores.
They all have to pay for the services they never even provided.
The country is already facing an economic crisis, and putting these companies in debt would only make matters worse.
When Would The Government Intervene?
The companies have been constantly trying to get some relief from the government, and they also know the companies do not have the required amount.
Government has sidelined the issue, and has been neglecting the telecom sector since long now, resulting in huge losses for everyone except Jio.
The government does not intervene because they are revenue-hungry like every government has been.
Would Airtel and Vodafone-Idea make it past the dues?
Airtel has already deposit ₹10,000 crores to the government, and with the funding raised recently and its Singapore backing, it will make it past this phase.
But Vodafone-Idea does not have the money. Experts say they do not know what is going to happen, and Vodafone-Idea will probably shut down.
Why Does Vodafone-Idea, such a huge company does not have any money?
Vodafone-Idea invested ₹47,700 crores in 2016, to fight with Jio. But the company continued to bleed with losses, and is now on the verge of shutting down.
Why would foreign entities invest in India if we do not acknowledge their contribution?
I don’t even use Vodafone-Idea, why does it matter if they shut down?
- The exit of Vodafone-Idea will make a duopoly in the telecom sector – with just Airtel and Jio.
- The domination of the two telecoms will allow them to charge you anything they want.
- The rates of calling and the internet will go sky-high, as the duopoly cartel will eliminate your cheap calling and internet.
- The exit will require the consumers to shift to the existing telecom companies, and they do not have the necessary infrastructure and the amount to set up the infrastructure for 336.26 million subscribers will be huge.
- Around 50 lakh jobs would be lost.
- No funds to setup 5G infrastructure for such a huge amount of people.
I believe the government should immediately intervene, to keep the healthy competition or else the days are countable when India would no longer be the country with the cheapest calling and internet.