India should be “less litigious” with telecom industry says Mittal

India telecom industry Sunil Mittal
Bharti Enterprises chiairman Sunil Mittal speaking at MWC in Barcelona

Bharti Enterprises’ chairman Sunil Mittal said that the Indian government should be “less litigious” with the telecom industry in the country as the approach has impacted the financial health of the industry.

His comments come at a time when the country’s Supreme Court has reserved its order in the adjusted gross revenue (AGR) case, which involves Bharti Airtel, Vodafone Idea and bankrupt telecom operators like Reliance Communications, Aircel and Videocon Telecom.

India’s top court in October 2019 upheld the government’s position on including revenue from non-telecommunication businesses for calculating the annual AGR of telecom companies.

Mittal said that the Indian Supreme Court’s order on the adjusted gross revenue (AGR) issue has taken out a lot of money from the country’s telecom industry, which could have been used for expanding network coverage in rural areas besides launching 5G technology. 

“Government should be less litigious with industry. My own stand is that once they lose a particular case at a particular level, they should not be necessarily forced to or compelled to take it…to the last point. Then it keeps on being into litigation forever,” Mittal said during an industry event.

“I mean there is a large amount which has been sucked out of our industry which I would rather have gone into building 4G networks in rural and bringing out 5G. This is the set up of our country. We will have to bow in front of the order of the highest court of the land, the Supreme Court,” he added.

The Indian government needs to be a little bit more “courageous” in dealing with some of the litigation, he said, adding that these statutory dues not only include payment to be made to the government but also penalties and interest on penalties.

While commenting on the financial health of the industry, the telecom czar also raised doubts on ailing telco Vodafone Idea’s sustenance and said that the government needs to think about the two-player market, which is not good for a country like India.

Mittal added that the sustainability of investments in this sector by Vodafone Idea is going to be in difficulty unless its promoters bring in a very large amount of fresh capital.

The Indian Supreme Court’s verdict on the tenure of paying AGR dues is expected to decide the future of Vodafone Idea. The telco had sought a staggered payment option to clear these dues over a period of 15 years.

The Indian government, however, had already approved a 20-year time period for companies to clear their AGR dues.

“It is a very, very small number left for a country like India. But the financial stress is coming along, marketeers are saying we may be down to two companies in the private sector,” Mittal said.

Analysts have said that Vodafone Idea’s magnitude, as well as the nature of its market share loss in the first quarter, is a reminder that sector consolidation is far from over and the market is moving steadily towards a duopoly. 

During the event, Mittal said that data service is being offered at low rates, which is not sustainable for the telecom market, hinted at a possible tariff hike in the next six months.

“We are not wanting $50-60 like the US or Europe but certainly $ 2 for 16 GB a month is not sustainable,” Mittal, adding that average revenue per user (ARPU) needs to go up to Rs 300 or $4.04 for the industry.

As per TRAI’s latest disclosure, during 1QFY21, net mobile revenues in India fell a mere 1% sequentially to an annualized US$21.7 billion despite the strict lockdown. The fall in revenues was led by urban-focused markets with Metros reporting a 20% sequential decline in revenues followed by A-circles which reported a 3% sequential decline.

Vodafone Idea saw sharp market share decline in metros and A-Circles, the
key urban markets.

“Given that these markets have higher dual-sim users, it seems subscribers are consolidating their usage/spends away from Vodafone Idea in these markets,” Jefferies said in a note.

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