Lockdown-led data usage a lifeline for telcos; spectrum sale on DoT radar

This year, however, the Department of Telecommunications (DoT) will be banking on selling spectrum to raise money, with the hope that telecom companies will evince interest as they need spectrum to expand services.

For the Indian telecom sector, the horoscope for 2020 was written nearly two months before the year had even begun. On October 24, 2019, the Supreme Court delivered a judgment that gave finality to a more than two-decade-old legal tussle — the adjusted gross revenue (AGR) issue. In its judgment, a three-judge Bench of the apex court ruled that the DoT’s definition and calculation of AGR was correct, and, therefore, the telcos as well as others who held spectrum licences would have to pay pending dues, penalty for not having paid their dues, and the interest on penalty. The SC, had then, noted the said dues would have to be paid within the next three months.

This year, however, the Department of Telecommunications (DoT) will be banking on selling spectrum to raise money, with the hope that telecom companies will evince interest as they need spectrum to expand services.

The direct impact of the SC judgment was on two major private telcos, Bharti Airtel and Vi (then Vodafone Idea). Having weathered the low price onslaught brought by Reliance Jio over the last four years, both Bharti Airtel and Vi had just about started getting back on track when the AGR judgment derailed their wagons again. The two companies were saddled with dues in excess of Rs 43,000 crore and

Rs 58,000 crore, respectively. In total, the dues were in excess of Rs 1.47 lakh crore. Most experts, Cellular Operators Association of India, and even the firms said this was most likely end of the line for them.

The situation was even more dire for Vi. The leadership of the company, including chairman Kumar Mangalam Birla made an unprecedented statement that if the government did not provide relief on payment of past AGR dues, Vi would have to “shut shop”.

In a rare brave affront on a court of law’s judgment, Bharti Airtel and Vi decided not to deposit any money, and let the deadline of January 23 lapse. The bravado had some backing with a last minute DoT order that said there would be no coercive action against the telcos, even if they did not pay any dues by the deadline. These actions, however, did not sit well with the SC. In a hearing on the issue on February 14, 2020, the three-judge Bench came down heavily on the companies, the DoT and all other parties, threatening everyone with contempt of court for not having deposited any monies.

By the evening of February 14, most telecom companies that owed any AGR to the DoT said they would pay part of their dues in a week’s time. And, so they did. On a hearing on the issue on March 17, there was some relief when the top court sought a payment schedule from the DoT as well as the companies. Meanwhile, Covid entered India. Within days, it threw economic activities out of gear. While manufacturing, services and other indicators of the economy took a beating, telecom raced ahead.

Data consumption skyrocketed, with Vi claiming that in the first three months of the lockdown, the company had seen more data consumption than it had seen over the last three years. The call volumes of all telcos was also northbound. Together, the three telcos and their dormant network capacities held fort as everything moved online.

More encouraging news was on the way for Bharti Airtel and Vi. In September, both companies got one more chance to fight in the ring, after fervent requests from the DoT, and the firms moved SC. In an order, the SC allowed them to pay their AGR dues in a staggered annual installment over the next 10 years starting April 1, 2021. Bharti Airtel, which has paid close to Rs 18,000 crore of the roughly Rs 43,000 crore that it owes has claimed a moratorium of several years from AGR payments. On the other hand, Vi, which said it has paid nearly Rs 6,900 crore, claimed the same, although for a smaller period.

For 2021, DoT’s biggest hope would be selling spectrum. It has put on offer the sale of 2251.25 MHz of spectrum across seven frequency bands at a reserve price of Rs 3.92 lakh crore. Along with the price, however, the total spectrum on offer has also been reduced by more than a third. The DoT has pinned hopes on making good money from the auction, citing that the telcos would need to buy spectrum in the 4G band to expand their services.

The last auctions, held in 2016, where the government offered 2,354.55 MHz at a reserve price of Rs 5.60 lakh crore, but managed to sell only 965 MHz, or about 40 per cent of the spectrum, and mop up only Rs 65,789 crore, can be taken as a tale of caution. Despite all forecasts, whether or not it will be a good pay day for the DoT can only be ascertained in March when auctions are held. Until then, the telecom sector holds on and survives to fight another day.

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