SC verdict on AGR: COAI warns of telecoms sector catastrophe; says Airtel, Vodafone Idea will face 'unprecedented crisis'

India’s telecoms sector and leading players Bharti Airtel and Vodafone Idea will face an “unprecedented crisis” if the government refuses to relax its demand for $13 billion in outstanding dues, a lobby group says

Reuters October 30, 2019 17:48:43 IST
SC verdict on AGR: COAI warns of telecoms sector catastrophe; says Airtel, Vodafone Idea will face 'unprecedented crisis'
  • Bharti and Vodafone Idea have been spooked by the Indian Supreme Court's decision last week to uphold a government demand that will force the companies to pay the bulk of Rs 92,000 cr in overdue levies and interest

  • The Cellular Operators Association of India (COAI) lobby group has joined the fray, seeking the intervention of telecoms minister in a letter dated 29 October, arguing that such payments will lead to a crisis at the companies and cause distress for the sector as a whole

  • Investments could be curtailed, services could deteriorate, jobs could be lost and investor confidence will most definitely be shattered, COAI Director General Rajan S. Mathews said

New Delhi: India’s telecoms sector and leading players Bharti Airtel and Vodafone Idea will face an “unprecedented crisis” if the government refuses to relax its demand for $13 billion in outstanding dues, a lobby group says.

Bharti and Vodafone Idea have been spooked by the Indian Supreme Court’s decision last week to uphold a government demand that will force the companies to pay the bulk of Rs 92,000 crore ($13 billion) in overdue levies and interest.

The Cellular Operators Association of India (COAI) lobby group has joined the fray, seeking the intervention of India’s telecoms minister in a letter dated 29 October, arguing that such payments will lead to a crisis at the companies and cause distress for the sector as a whole.

SC verdict on AGR COAI warns of telecoms sector catastrophe says Airtel Vodafone Idea will face unprecedented crisis

Representational image. Reuters

“Investments could be curtailed, services could deteriorate, jobs could be lost and investor confidence will most definitely be shattered,” COAI Director General Rajan S. Mathews said in the letter seen by Reuters.

“The impact of this crisis could exacerbate the stress in the industry and potentially be catastrophic for the nation.”

The government’s telecoms department did not respond to a request for comment.

On Monday, a government source said that a panel of bureaucrats had been formed to suggest ways to alleviate financial pressures on the sector.

The $13 billion demand could also place in jeopardy the Rs 60,000 crore ($8.5 billion) of annual payments the two operators make to the government and threaten the companies’ ability to service existing debt, the COAI said in the letter.

“Such an adverse outcome will trigger a chain of events which will result in disruption to the entire business chain,” the letter said, with the COAI seeking a two-year moratorium on payments for airwave spectrum from 2020 to 2022.

India’s crowded telecoms sector once had more than a dozen mobile operators but consolidation has resulted in only three private players - Bharti, Vodafone and Jio - and two other debt-ridden state companies.

Reliance Industries-owned Jio began operations in late 2016 and is least affected by the ruling because it has only $2 million in charges to clear.

(Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd which publishes Firstpost)

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