India must have at least 3 private telcos, says Sunil Mittal

NEW DELHI: Bharti Airtel chairman Sunil Mittal called on the government to ensure that the Indian telecom market continues to have three private carriers. He also urged the Centre and the judiciary to give “sympathetic consideration” to the industry’s appeal for relief after the Supreme Court’s order on adjusted gross revenue (AGR) left companies struggling.


Mittal also said the telecom regulator needs to urgently intervene to fix a floor price for tariffs. This, he said, is required for the average revenue per user (ARPU) to rise to Rs 200 initially, and to Rs 300 over time, for the industry to be healthy and sustainable.

“The situation is dire — it is a matter of survival for everyone. Vodafone (Idea) is in losses, Airtel is in losses, (state-owned) BSNL (Bharat Sanchar Nigam Ltd) is in losses,” Mittal said.

‘We’ve been Killing Each Other’
“There is one competitor who has unlimited access to finances — I wouldn’t comment on that but the situation is bad,” he said soon after a meeting with Department of Telecommunications (DoT) secretary Anshu Prakash on Wednesday.

“We have gone through several crises but this is the most difficult time for the industry,” Mittal added.

The presence of more companies is key to consumers being well served by competition.

“It is absolutely essential that we have three (private players) plus one (state-run) players,” he said. “Lower the taxes and find ways and means to support the sector in one form or the other.”

He urged the Supreme Court to consider Bharti’s review petition with understanding.

“The honourable SC needs to look at our review petition from the point of view that there are unintended consequences and lots of other companies, including public sector, are coming into this unreasonable AGR definition, which could have never been the intention,” he said.

He was referring to the government’s recent clarification that the AGR order will be applicable to all telecom licensees, which includes companies such as GAIL, RailTel, Power Grid and others. These companies, which may have minor telecom businesses, may have to pay dues based on their entire revenue with retrospective effect.

“Our legal team were perhaps not able to persuade the honourable Supreme Court on the unreasonableness of DoT’s AGR interpretation but equally, I think DoT didn’t realise the unintended consequences on the larger ecosystem,” said Mittal, adding that the government should have a “sympathetic view” towards the industry.

Mittal said his comments were in the context of statements made by both Vodafone Group CEO Nick Read and Vodafone Idea chairman Kumar Mangalam Birla, both of whom have said in the recent past that the Indian telco will have to shut if it doesn’t get any relief on AGR dues.

“It will be very self-serving for me to say that two plus one is fine. I, as a person who has watched this industry from scratch — I was the first private sector guy in telecom — so, from that point of view I think India needs three plus one,” Mittal said, referring to analysts who have said that Bharti Airtel stands to gain if Vodafone Idea collapses. He pointed out China, the world’s largest market, has three and the US has four operators.

MORATORIUM NOT ENOUGH
The recent two-year moratorium on spectrum payments won’t do much to help Vodafone Idea unless there is relief on the AGR dues. “Otherwise, it is just deferment with interest,” Mittal said.

Vodafone Idea was left facing statutory dues of over Rs 53,000 crore, as per the telecom department’s calculations, following the October 24 Supreme Court verdict that broadened the definition of AGR to include non-core items. The amount could go up, the government has said. Bharti Airtel faces over Rs 35,500 crore in additional dues comprising licence fees, spectrum usage charges (SUC), interest and penalties.

Both telcos, which have filed separate review petitions, reported record losses of over Rs 50,000 crore and Rs 23,000 crore in the July-September quarter, respectively, owing to provisions for the AGR dues. The government has previously said it can’t give AGR relief, unless directed to do so by the court.

Licence holders have to pay about 8% of AGR to DoT as fees. Telcos also need to pay 3-4% of AGR as SUC.

Fifteen telecom companies that were directly party to the case owe the government about Rs 1.47 lakh crore. The industry estimates that non-telecom companies that have telecom licences may have to pay about Rs 2.28 lakh crore, calculated from the time they got their respective permits.

Mittal said that non-telecom companies such as GAIL, RailTel, Power Grid and Delhi Metro will now be charged licence fees even for the sale of gas or train tickets as per the wider interpretation of the apex court ruling, which shouldn’t be the case.

“Ramifications were huge and therefore the review petition is in front of the honourable SC and we hope they will look into this whole thing,” he added. He said the AGR dues have added to the woes of the industry, which has been swamped by “unprecedented competition” for over three years—since the entry of Reliance Jio in September 2016—which has hurt balance sheets and caused financial stress, triggering the exit of eight operators.

“In the quest for being in the market, we have been killing each other for three and a half years,” Mittal said. “It is an odd situation — we need a digital ecosystem to support new age industries but equally, the industry is in a crisis”.

RARE SITUATION
He added that setting a floor for tariffs was essential.

“It is a rare situation where we have written to the Trai (Telecom Regulatory Authority of India), saying please regulate us, because the industry is killing itself. Tariff needs to go up, industry needs to become viable,” said Mittal. “Also, the fact that the three of us (Airtel, Reliance Jio Infocomm and Vodafone Idea) have written to the regulator says something. First time, the COAI (Cellular Operators Association of India) has an agreement to write something.”

Last week, all three carriers, through COAI, asked the sector regulator to establish floor pricing for data services soon. Due to fierce rivalry, tariff correction was not possible voluntarily by any carrier, it said.

“My own view is India needs to be eventually at Rs 300 (ARPU), per month which means customers at low end need to pay about Rs 100 and higher end need to pay Rs 450-500, where they are consuming a lot,” he said.

The government needs to lower levies to help the industry.

“You can’t have telecom services being taxed like the sin tax! 30% of revenues are going in one form or the other—that must come down,” said Mittal.

He urged the telecom ministry to take up issues such as lowering licence fees and SUC in some forum, given that the panel of secretaries set up to provide relief to the industry didn’t take decisions on those matters.

Mittal wasn’t hopeful of a refund of the Rs 36,000 crore input tax credit lying with the finance ministry, given the government’s finances.

“It is our money sitting with the government and even if they cannot refund it, can they at least offset it? Rs 36,000 crore, this is sizeable sum of money, we get no interest on this but we pay interest,” said Mittal.

He said however that Bharti Airtel was fighting it out in the market place.

“We are in a better situation—we have now decided to raise funds,” Mittal said. “However, if you have to go in for network expansion, invest in newer technologies, bid for 5G spectrum and then build a 5G ecosystem which India deserves, then industry needs to be viable.”

Referring to the Bharti Airtel statement in the fiscal second quarter regarding concerns about viability if it couldn’t raise money on its terms in the face of the AGR dues, Mittal said, “That is an accounting standard… They (auditor Deloitte) called it out. It isn’t my interpretation or view of the company… It is a standard and that is why we are in the market to raise money.”