It’s been another extraordinary week for Indian telecoms, ending with operator Vodafone Idea having to calm market fears that Vodafone in particular might leave India.
Reports in the Indian press indicated that Vodafone Idea shares jumped at the end of the week after the company clarified that it is not going to exit the Indian market.
Mounting losses and the growing issue of the billions demanded after a recent Supreme Court ruling have added to fears that the weight of debts and taxes could drive the operator out of the market.
Adding to the sound and fury around recent events, telecom industry association the Cellular Operators’ Association of India (COAI) has sought a complete waiver of statutory dues that its members (notably Bharti Airtel and Vodafone Idea) owe to the government following the ruling.
As previously reported, the Supreme Court last week upheld the government’s position on including revenue from non-telecommunication businesses in calculating the annual gross revenues of telecom companies, a share of which is paid as licence and spectrum fee to the exchequer. The principal due, together with interest and penalties, has to be paid within three months.
Reliance Jio, not too surprisingly, dissents from the COAI view, but it’s hard to argue with other reports that suggest cost pressures (including spectrum costs that are among the highest in the world) are not just piling on debt but limiting the sector’s ability to attract and retain talent. One report even suggests that the industry is heading for a, potentially unhealthy, duopoly.
The Indian government has said it will look into measures to ease the financial burden on operators but, with 5G auctions not far off, it may have to come up with something quickly to ensure a positive response from operators to the idea of purchasing potentially pricy spectrum for longer-term advanced mobile services.
