The Supreme Court’s recent ruling on AGR has dealt a big blow to the incumbents’ already strained finances. During the quarter ended September 2019, Vodafone Idea reported losses of almost half a trillion rupees on account of provisions made for AGR-related liabilities. For Bharti Airtel, the figure stands at Rs 228.3 billion.
Unbridled competition, raging price wars and adverse policy/regulatory moves have financially incapacitated the incumbents in the past few years. Faced with mounting losses, they have been cutting their capex quarter after quarter, which has adversely impacted their ability to invest in network expansion and upgrades.
The situation will reach crisis proportions if the government does not act urgently. In the absence of any major policy/regulatory relief, Vodafone Idea’s future would get impacted.
This would not only have a bearing on the sector’s competitive landscape but would also hurt the investment climate in the country deeply. This, in turn, will seriously affect the industry’s ability to raise funds for 4G proliferation and 5G roll-out.
Telecom is a strategic sector and is at the core of India’s big digital transformation. Every rupee invested in the telecom market has a domino effect on the larger digital value chain. Thus, restoring the sector’s financial health and ensuring its long-term sustainability should be the top-most priority for the government. DoT’s suggestion to look into establishing a floor price for tariffs might help put the brutal price war to rest.
Fine-tuning of the existing policy and regulatory regime is needed to bring predictability and certainty in the sector and to ensure long-term industry competitiveness.
For now, the industry is keenly awaiting the relief package that the Committee of Secretaries is reportedly working on. The measures proposed by it will shape the future course of the sector.
