Tag: telecom sector

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JFSL Shares Hit Lower Circuit on Listing Day – Top Indian Market Updates

Here are some of the major updates that could move the markets tomorrow:

Jio Financial Services shares hit 5% lower circuit on listing day

Jio Financial Services Ltd. closed at a 5% lower circuit at ₹248.50 per share after a muted listing on the Indian exchanges. The shares were listed at ₹262 per share on the National Stock Exchange over the discovered price of ₹261.85. On the BSE, the stock listed at ₹265 over the derived price of Rs 251. This is against the expectation of a listing premium widely expected by market analysts.

Read more here.

Wockhardt shareholders reject proposal to raise ₹1,600 crore from promotor

Shareholders of Wockhardt have rejected a proposal to raise ₹1,600 crore from a promoter entity. The board of the Mumbai-based drug firm had sought shareholder approval for a related party transaction with Khorakiwala Holdings & Investments Pvt Ltd (KHIPL) to raise up to ₹1,600 crore for five years. KHIPL is an RBI-registered non-banking financial company.

Read more here.

Tata Technologies joins AUTOSAR as premium partner

Tata Technologies has joined AUTOSAR, a worldwide development partnership of car manufacturers, suppliers, and other firms, as a premium partner. AUTOSAR aims to standardise the software architecture of vehicle electronic control units (ECUs) to improve the overall efficiency of automotive system software development and integration.

Read more here.

TPREL to supply 9 MW green energy to Tata Motors plant

Tata Power Renewable Energy Ltd (TPREL) will supply 9 megawatts (MW) of green energy to Tata Motors’ plant in Pantnagar as part of an agreement. The project will be commissioned within six months from the PPA execution date. It will utilise rooftop and ground-mounted units for installation. It is estimated to make a carbon emission reduction of 25 tonnes annually.

Read more here.

Alembic, Aurobindo Pharma recall drugs in US market

According to the US Food & Drug Administration (USFDA), Alembic Pharmaceuticals and Aurobindo Pharma are recalling different products in the US market due to manufacturing lapses. The US-based subsidiary of Alembic Pharma is recalling 82,400 bottles of Tobramycin Ophthalmic Solution (used to treat bacterial infections of the eye). Aurobindo Pharma’s US arm is recalling 48 bottles of Rufinamide Tablets (used to treat seizure disorders).

Read more here.

Telecom sector AGR up 2.53% QoQ in Q4: TRAI

According to data released by the Telecom Regulatory Authority of India (TRAI), the telecom industry recorded a 2.53% sequential growth in adjusted gross revenue (AGR) in the fourth quarter of FY23. Reliance Jio’s quarterly AGR (or revenue from licensed services) grew 1.7% sequentially to ₹22,985 crore in Q4, while Bharti Airtel’s rose 1.15% quarter-on-quarter (QoQ) to ₹18,500 crore. Vi’s AGR fell 1.61% QoQ to ₹7,210.63 crore in Q4.

Read more here.

Indian Oil Corp begins digitalisation drive

Indian Oil Corporation Ltd (IOCL) has embarked on a major data-driven digitalisation drive to optimise its crude purchase, refinery operations and financial management, which has helped boost its efficiency and revenues. IOCL generates data daily from its refineries, pipelines, petrol pumps, aviation fuel stations, natural gas networks and petrochemical operations.

Read more here.

Vipul Organics enters into paper segment

Specialty chemicals maker Vipul Organics has entered into the paper segment with products like colourants, dispersions and dyes. The company is in the process of setting up a paper lab that will be fully functional shortly. It has already launched products under two categories in the segment. One range of pigment dispersions is developed exclusively for paper application, while the other one is ‘direct dyes’ for paper coating application.

Read more here.

Tanla Platforms ends pact with Vodafone Idea

Tanla Platforms has decided to discontinue its agreement with Vodafone Idea. The company had entered into a term sheet with Vodafone Idea for the provision of platform and firewall services for international A2P (application-to-person messaging) services in November 2021, which was valid for 2 years. The ending of the partnership would have a revenue impact of ₹17 crore and a net profit impact of ₹9 crore on a full-quarter basis after November 2023.

Read more here.

Inox Green Energy secures ₹40 crore order from NLC India

I-Fox Windtechnik India Pvt Ltd (a subsidiary of Inox Green Energy) has secured an order from NLC India for the Operation and Maintenance (O&M) of 51MW wind turbine generators located in Tamil Nadu. The scope of the contract comprises comprehensive O&M (including a power evacuation system) for 5 years with a revenue realisation of ₹40 crore (inclusive of taxes) during the contract period.

Read more here.

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Editorial

Why Does Everyone Hate the Draft Telecom Bill 2022?

Two months ago, the Indian government released a draft of the Telecommunication Bill, 2022. The Centre believes the time has come to update some of the outdated laws in the telecom sector. While it has some good intentions (well, sort of), the draft bill received a lot of criticism and backlash. If this bill is approved, the government could even indirectly force you to pay for using services like WhatsApp! 

In this article, we dive into the Draft Telecom Bill and see why it has become so controversial.

What is the Draft Telecom Bill 2022?

The Draft Telecommunication Bill, 2022, is an attempt by the Indian government to modernise the existing regulatory framework in the telecom sector. The new bill aims to replace three existing acts: the Indian Telegraph Act (1885), Wireless Telegraphy Act (1933), and Telegraph Wires (Unlawful Possession) Act (1950). 

As we know, India’s telecom sector has gone through a wide range of technological advancements and challenges over the past few decades. So it’s vital to modify outdated regulations and form new ones to keep up with all the rapid changes. According to our government, the new bill aims for “minimum but effective regulation of the telecom sector.”

Key Features of the Draft Telecom Bill, 2022:

  • There’s a proposal to bring over-the-top (OTT) communications services or apps under telecom services. WhatsApp, Telegram, Google Meet, and other internet-based apps/software may have to obtain licenses to operate in our country! However, it’s still not clear what comes under “OTT services.” 
  • The bill brings clarity around spectrum allocation. [A spectrum is a range of radio waves used for communication.] It would strengthen the government’s authority to assign spectrum, with or without auctions. The govt may also relax rules around sharing, trading, and leasing spectrum.
  • The draft bill also includes a provision for the govt to defer, write off, or grant relief to any telecom operator or firm that is facing financial stress. This would benefit struggling firms like Vodafone Idea.
  • There will be strict measures to check and verify documents required to acquire a SIM or create accounts on OTT communication platforms. Know Your Customer (KYC) will become mandatory for user verification. Forging documents may lead to imprisonment of one year or a fine of up to ₹50,000. Telecom operators will have to display the name of the caller when only the phone number is visible (like Truecaller)!
  • The draft bill proposes an efficient way to resolve disputes through arbitration or mediation (settling issues outside courts).

So Why Are People Angry?

Ever since the draft bill was published in September 2022, a large number of stakeholders within the digital ecosystem in India have taken to social media and other platforms to show their outrage against the draft bill! Many feel that the new rules are likely to kill the progress of the government’s own vision of a Digital India. Let’s see how these proposed laws could affect you:

  • Messaging platforms like WhatsApp and Telegram allow crores of Indians to send texts and make video calls via the internet (for free). There are no barriers for such platforms to enter the Indian market and don’t have to pay any fees to provide such services. They don’t have any obligation to share user data with the government.
  • On the other hand, telecom service providers like Reliance Jio and Bharti Airtel have to pay huge fees to the Central govt to use spectrum (airwaves) and provide voice & data services. You and I pay for data packs to access the internet, send messages via WhatsApp, and watch movies/TV shows on OTT platforms like Netflix. 
  • But now, the Central government wants to bring all companies that provide broadcasting services, e-mail services, voice & data services, internet & broadband services, and OTT communication services under its control/purview! It wants such companies/apps to obtain a license to operate in India!
  • Here’s a more shocking proposal mentioned in the draft bill: messaging apps/platforms (which implement end-to-end encryption) may even be required to intercept and disclose any message at the request of the govt! Surely a blatant invasion of privacy.

The Way Ahead

Now, suppose the proposed bill becomes law. The government can essentially levy hefty fees on existing companies (like WhatsApp, Google Meet) to obtain a license and offer services in India. And how would WhatsApp recover these fees? From users like you and me! Such strict laws and fees will also discourage new companies or developers from rolling out path-breaking apps or software to the public! It would kill innovation and digital transformation in our country!

Now, you may wonder why the government has even proposed such strict measures in the telecom sector. Well, they want to improve national security through “lawful” interception! The Centre argues that bringing platforms like WhatsApp and Telegram under its purview could help identify criminals or terrorists. But interestingly, many people have pointed out that there’s already a section in the current Information Technology (IT) Act that allows the government to issue directions to digital communications apps and monitor messages! So realistically, there’s not really a need for new licensing laws! 

The government needs to go back to the drawing board and ensure that the new provisions under the Telecom Bill support all forms of innovation for a greater Digital India! What are your thoughts on the government’s Draft Telecom Bill? Let us know in the comments section of the marketfeed app.

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Editorial

5G Officially Launched in India: What Can We Expect?

After a long wait, Prime Minister Narendra Modi officially launched 5G services in India on October 1. Companies involved in the telecom, optic fiber, and network infrastructure segments are gearing up for a pan-India rollout. However, it could take a while for most of us to experience 5G on our phones. In this article, we discuss how 5G would be beneficial for our economy and what we can expect from the 5G revolution.

What are the Benefits of 5G?

The fifth generation of mobile networks won’t just mean ultra-fast internet speeds. It would bring lag-free connectivity, better coverage, and energy efficiency. Internet speeds on 5G could touch 10 gigabits per second (Gbps) at its peak, compared to the 100 megabits per second (Mbps) of 4G. Telecom operators have promised more reliability, massive network capacity, and increased availability of 5G. 

5G offers high bandwidth for quick data transfer. You’ll be able to live stream videos in better quality than before. India’s healthcare, education, automotive, defence, and gaming sectors will get a boost with enhanced augmented reality (AR) & virtual reality (VR) applications and experiences. 5G networks would also improve accessibility to mobile banking.

Jio vs Airtel vs Vi: Preparing for 5G Battle!

  • In the recent 5G spectrum auctions, Reliance Jio emerged as the top bidder with investments of ~₹88,000 crore. It bought 24,740 megahertz (MHz) of bandwidth. The company bought expensive pan-India airwaves to offer better 5G coverage quality and speed. Thus, it has a competitive advantage over rivals. Jio has also promised to offer “the most affordable 5G rates in the world” and roll out services to each corner of India by December 2023.
  • Second-largest telecom operator Bharti Airtel bought 19,867.8 MHz of airwaves worth ₹43,084 crore. It is relying on mid-band spectrum acquisitions to offer essential 5G services. Airtel has become the first telco to provide 5G networks in India. It will roll out 5G in 8 cities, including Mumbai, Delhi, Bengaluru, and Kolkata.
  • Cash-strapped Vodafone Idea (Vi) spent ₹18,799 crore to acquire 6,228 MHz of airwaves. Vi has not announced any vital 5G-related developments yet.

All telecom operators are expected to reveal their 5G plans in the coming weeks. Various reports indicate that 5G plans would be priced similarly to 4G plans currently offered in India. Others say it would be at least 10-12% higher than 4G plans in the initial stage.

What are the Key Challenges?

  • During the initial 5G rollout, telecom companies will not be able to cover the entire length and breadth of India. It will only be available in Tier-1 cities first and gradually expand to Tier-2,3 cities in a couple of years. More transmitters would be needed to cover the same area as current 4G networks.
  • Another issue is that 5G signals can be blocked by walls, glass, or trees due to their shorter wavelengths. Thus, you may not get good signals inside a building or basements. 
  • The high cost of network infra and spectrum could nudge telcos to levy a premium for 5G services. Price-sensitive Indian consumers may be reluctant to adopt the technology.
  • Most 5G smartphones available today tend to consume more battery as it keeps switching between 4G and 5G. Top mobile brands will need to invest in new battery technologies.

The Way Ahead

Over the past year, smartphone brands have advanced swiftly and launched a wide range of 5G smartphones. But if you’re buying a 5G phone now, you may be paying a premium for a feature that you can’t use for at least a year. Moreover, entities involved in the 5G rollout would have to tackle issues such as limited signal range and cybersecurity concerns.

The launch of 5G will pave the way for new economic opportunities and benefits for Indian societies. It will support innovations and transform our country into a more digitally empowered and knowledgeable economy. As per reports, the cumulative economic impact of 5G on India is estimated to reach a whopping $450 billion by 2035, provided that we have a smooth rollout.

 In an early edition, we discussed how we can profit from this new revolution in the world of networking. You can read it here!

 Are you excited for the arrival of 5G in India? Let us know in the comments section of the marketfeed app!

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Editorial

Can a Relief Package Save the Telecom Sector?

Telecos Vodafone Idea and Bharti Airtel can finally breathe a sigh of relief. The Union Cabinet has approved a crucial relief package that will ease the financial burden of telecom companies. The new measures seek to drive progress, facilitate investments, and increase employment opportunities in India’s telecom industry. In this article, we shall dive into the reforms approved by the Centre. 

What’s in the Relief Package?

  • The Union Cabinet has approved a four-year moratorium on payment of unpaid spectrum and AGR dues by telecom companies. For clarity, spectrum dues is the amount payable to the Centre for airwaves that were purchased via auctions. Adjusted Gross Revenue or AGR is a percentage of a telecom firm’s total revenue “shared” with the government. [You can learn more about AGR here] Interest will be levied if companies opt for the moratorium. 
  • The government has also decided to allow 100% foreign direct investment (FDI) in the telecom sector through the automatic route. It means that foreign investors can now invest fully in telecom firms without prior approval. Currently, only 49% FDI is allowed through the automatic route. Anything beyond that has to necessarily go through the government route. 
  • The definition of Adjusted Gross Revenue (AGR) paid to the government will be changed to exclude all non-telecom revenue. Currently, telecos have to share a percentage of their total income, including those from interest income, sale of assets, and other miscellaneous income. 
  • There will be an increase in the tenure of spectrum ownership to 30 years, compared to the current tenure of 20 years. It means that companies securing the rights to use spectrum (or airwaves) can now leverage the assets for up to 30 years after bidding for them in future auctions. There will be a cut in spectrum usage charges (SUC) to reduce the capital cost (fixed, one-time charges) of telecom firms. The government will also scrap SUC for airwaves acquired in the upcoming auctions.
  • The package is also expected to boost and expand the 4G network footprint in India. It will also create an enabling environment for investment in 5G networks.

How Will it Benefit the Telecom Sector?

The structural reforms introduced by the Centre are expected to bring positive changes to the entire telecom landscape of India. These measures are aimed at providing much-needed relief to players such as Vodafone Idea (Vi) and Bharti Airtel, who are struggling with huge debt. Vi, who has been losing lakhs of subscribers every month, is on the brink of declaring bankruptcy. 

As of 2019, telecom operators collectively owed nearly Rs 1.47 lakh crore to the Centre. Out of this, Vodafone Idea’s deferred spectrum charges stand at ~Rs 1.06 crore! In 2019, telecos were offered an extension of two years to pay off all financial obligations with interest. Reports suggest that Vi has to pay an installment of Rs 16,000 crore at the end of March 2022. Unfortunately, the financial condition of most telecom companies has continued to deteriorate. Thus, the government has now deferred these payments by another four years. This measure will provide space for financially stressed telecos to improve their business and clear dues over a longer period. 

We know that Vi has been losing lakhs of subscribers due to cutthroat competition in the telecom space in India. The company is unable to compete with aggressive tariff rates from Reliance Jio and Airtel. The risk of a duopoly (two firms dominating a market) would lead to a further hike in tariffs. Moreover, the cash-strapped firm is not in a position to invest in 4G/5G infrastructure. The approval of 100% FDI in the telecom sector will help address the cash flow issues faced by Vodafone Idea. Foreign institutions could swoop in and save the company from its inevitable death. Vi needs to raise capital quickly to survive in the industry. 

Conclusion

The relief package will be instrumental in generating more jobs (due to new investments) and protecting the overall interests of consumers, employees, banks, and the government at large. It comes as a virtual lifeline for Vodafone Idea. The moratorium will bring relief to lenders that have massive exposure to distressed telecom operators. If companies are still finding it difficult to pay off their financial obligations at the end of four years, the government will be open to acquiring their equity. 

The package has made vital changes to telecom regulations, which will support the growth of entities in the telecom sectors in the long term. However, the Centre may find it difficult to support BSNL from collapsing while also extending measures to private players. There is no clarity whether the relief package will resolve all challenges faced by Vodafone Idea. However, it will surely help them to tide over the immediate crisis. Vi has found a breathing space but still has a long way to go. As per the recent data released by India’s telecom regulator, Vi continues to lose subscribers. Meanwhile, Reliance Jio and Bharti Airtel are in tight competition to secure more market share. 

Ultimately, we have to analyse how telecos take advantage of these relief measures and improve their financial metrics. What are your views on the relief package for the telecom sector? Let us know in the comments section of the marketfeed app.

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TCS to Invest Rs 690 crore to Set Up Innovation Park in Kochi – Top Indian Market News

TCS to invest Rs 690 crore to set up Innovation Park in Kochi

Tata Consultancy Services (TCS) has agreed to invest Rs 690 crore to set up an Innovation Park in Kochi. The Kerala state government has allocated 36.84 acres of land to TCS for setting up a unit for Electronics Hardware & IT/ITES in KINFRA Electronics Manufacturing Cluster at Kakkanad, Kochi. The first phase of the project will commence operations in the financial year 2023-24 (FY24). The campus will have a capacity to cater to 10,000 employees once it becomes fully operational.

Read more here.

Zomato, Swiggy to collect 5% GST on deliveries

Online food delivery apps such as Zomato and Swiggy will now have to collect and deposit 5% Goods & Services Tax (GST) on food deliveries instead of restaurants they pick orders from. The rule was approved by the GST Council to stop revenue leakages that were occurring under the current structure, as many restaurants were avoiding GST payments on food deliveries. There will be no extra tax burden on end consumers taking food delivery from restaurants registered with GST.

Read more here.

Wipro launches co-innovation space with Google Cloud in Bengaluru

Wipro Ltd has launched the Wipro-Google Cloud Innovation Arena in Bengaluru to accelerate the adoption of cloud services. The cloud collaboration space will provide in-house technical expertise and ensure seamless cloud adoption. It will also accelerate innovation to drive business transformation for customers. The arena will also showcase the talent, tools, and best practices requires to develop and deploy applications on Google Cloud.

Read more here.

Phoenix Mills looks to double its portfolio of retail properties by FY26

Mall developer Phoenix Mills Ltd is looking to double its portfolio of retail properties by the financial year 2025-26 (FY26). The company also wants to add 1 million square feet each year post FY26. Currently, Phoenix Mills has 6.9 million sq. ft of malls in cities such as Mumbai, Pune, and Beng­aluru. 

Read more here.

Tata Motors launches Safari Hold Edition at Rs 21.89 lakhs

Tata Motors Ltd has launched a special edition of its flagship model Safari, priced at Rs 21.89 lakh, to further spruce up the range ahead of the festive season. The Safari Gold Edition comes in two carefully crafted special colour schemes— White Gold and Black Gold. It is set to be showcased at the upcoming second leg of the VIVO IPL 2021.  

Read more here.

Zydus Cadila gets USFDA approval for antidepressant drug

Zydus Cadila has received final approval from the US Food and Drug Administration (USFDA) to sell new generation anti-depressant Vortioxetine in the US market. The drug works by increasing serotonin (the key hormone that stabilizes our mood and happiness) in the brain. It is classified as a selective serotonin reuptake inhibitor and serotonin receptor modulator. The pharma company will manufacture the drug at the group’s formulation manufacturing facility at the SEZ, Ahmedabad.

Read more here.

Moratorium to give Bharti Airtel, Jio cash relief of Rs 16,000 crore per year: Report

According to industry analysts, a potential annual cash flow relief of over Rs 16,000 crore from the four-year moratorium allowed on statutory payouts will give telecos Bharti Airtel and Reliance Jio the financial headroom to participate aggressively in the 5G airwaves sale (spectrum auctions) early next year. Airtel will opt for the four-year deferred option for adjusted gross revenue (AGR) and spectrum payments. Vodafone Idea, weighed down by Rs 1.9 lakh crore of debt and with a cash balance of Rs 920 crore, is also expected to opt for the deferred payment option.

Read more here.

Supreme Court to review 2019 verdict in Adani Power case

The Supreme Court has decided to reconsider its 2019 judgment, which affirmed Adani Power-Mundra’s call to terminate the power purchase agreement (PPA) signed with Gujarat Urja Vikas Nigam (GUVNL). A five-judge bench issued notices on a curative petition filed by GUVNL after noting that the plea raises significant questions of law. Apart from Adani Power (Mundra), notices have also been issued to Gujarat Electricity Regulatory Commission (GERC) and an NGO, Consumer Education and Research Society.

Read more here.

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Editorial

Is Vodafone Idea Staring at Slow Death?

Vodafone Idea Ltd (Vi) has been all over the news lately. Unfortunately, none of the reports about the company are positive. They are losing lakhs of subscribers rapidly and are destined to file for bankruptcy soon. There is a high level of uncertainty surrounding the survival of the telecom operator. Many feel that Vi is staring at slow death. The company’s shares have plummeted nearly 30% over the past month.

In this article, we take a closer look into the current state of Vodafone Idea and its recent financial performance.

Vi’s Massive Debt

With the exception of Reliance Jio, the major players in the Indian telecom industry are struggling with high debt. Companies have to pay hefty charges for operating and using the public airwaves in our country. They obtain rights to transmit signals over specific bands through telecom spectrum auctions. As of 2019, telecom operators collectively owed nearly Rs 1.47 lakh crore to the Centre. They were offered an extension of two years to pay off all financial obligations with interest. Vodafone Idea’s deferred spectrum charges stand at Rs 1.06 lakh crore! Reports suggest that Vi will have to pay an installment of ~Rs 16,000 crore at the end of March 2022.

Then comes Adjusted Gross Revenue (AGR) dues. Under this revenue-sharing model (introduced in 1999), telecos are required to share a percentage of their total income with the government as annual license fees and spectrum usage charges. AGR covers the revenue earned by telecom firms, including from non-telecom sources such as deposit interests and the sale of assets. [Read more on AGR dues here].

Vodafone Idea’s total liability towards AGR dues stands at Rs 62,180 crore (as of June 30, 2021)! An installment of ~Rs 8,400 is due in March 2022. Moreover, Vi’s debt from banks and financial institutions stands at Rs 23,400 crore. All these have caused a severe dent in the company’s balance sheet.

Heavy Competition

As we know, Vodafone Idea faces stiff competition from Reliance Jio Infocomm and Bharti Airtel. Jio dominates India’s mobile market and has maintained over 35% gross subscriber market share since July 2020. They plan on launching 5G services very soon. On the other hand, Bharti Airtel had outperformed Jio in terms of active subscriber rates over the past few quarters. In February 2021, they also became the first telecom company to demonstrate 5G over a live commercial network in India (in Hyderabad). 

Meanwhile, Vodafone Idea has been losing lakhs of subscribers. The company has been in deep trouble ever since Jio introduced aggressive tariff rates in India. From November 2019 to February 2021, Vi reportedly lost over 5 crore subscribers. Their rivals had collectively added over 6.6 crore subscribers during the same period. The cash-strapped company is finding it extremely difficult to compete with low tariff rates and invest in 4G/5G infrastructure. 

Vi’s management has to constantly focus on retaining customers and paying their AGR dues.

Disappointing Q1 Results

Vi posted its quarterly results for the April-June quarter (Q1 FY22) on August 14, 2021. The results were below the street/analysts’ estimates. Let us look at the main highlights: 

  • Vodafone Idea reported a net loss of Rs 7319.1 crore for the quarter ended June (Q1 FY22). It had posted a net loss of Rs 7,022.8 crore in the previous quarter (Q4 FY21). Net loss in Q1 FY21 stood at Rs 25,460, mainly due to provisioning for AGR dues liability.
  • The telecom operator’s revenue fell 4.7% QoQ (or 14% YoY) to Rs 9,152.3 crore in Q1. This is the company’s lowest quarterly revenue in more than two years. Fewer recharges due to localised lockdowns, free validity extensions for low-cost customers, and a general slowdown in economic activity affected revenue in Q1.
  • Vi’s wireless subscriber base stood at 25.54 crore as of June 30, 2021. Unfortunately, they had lost 1.23 crore subscribers since March. The 4G subscriber base stood at 1.23 crore, a decline of 10 lakh subscribers during the quarter.
  • The Average Revenue Per User (ARPU) declined to Rs 104 in Q1 FY22, compared to Rs 107 in Q4 FY21. For comparison, Bharti Airtel had an ARPU of Rs 146, whereas Jio had an ARPU of Rs 138 in Q1.
  • Vi’s net debt stood at Rs 1,90,670 crore in Q1, an increase of 5.95% QoQ (or 65.1% YoY). 

What Next for Vi?

Sadly, the Vodafone Group has made it clear it will not infuse any additional capital into the loss-making venture with Aditya Birla Group. In a desperate attempt to save Vi, Kumar Mangalam Birla wrote a letter to the Indian government last month. He offered to hand over his stake in the company to any public sector entity. He pleaded with the Centre to consider the “looming crisis” that the telecom operator is going through and bail them out. On August 4, Vodafone Idea announced the Birla has stepped down as Non-Executive Director and Non-Executive Chairman of the Board. Many argue that the Indian telecom industry is struggling now as a result of the brutal or repressive policies introduced by past governments.

Over the past few months, Vi has been trying to convince the Telecom Regulatory Authority of India (TRAI) to impose a floor price or a minimum tariff rate. The company has stated that such a measure will help existing telecom operators to earn more. Vodafone Idea has also pleaded to the Centre to extend the moratorium on spectrum dues. They are eagerly awaiting a judgment on these appeals. 

According to analysts, Vi is staring at a ‘slow death’ if it fails to quickly raise ~Rs 26,000-37,000 crore that it urgently requires to clear AGR dues, payment obligations, and invest in 4G networks. Reports are flying around stating that the Centre will soon announce a telecom relief package, and work is underway to provide aid to stressed telecom companies.

Will Vodafone Idea survive? Or will it completely collapse and die? We will have to patiently wait and watch. Let us know your views on the topic in the comments section of the marketfeed app.

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Editorial

The entire Telecom AGR saga

agr

What is AGR- Adjusted Gross Revenue?

Whenever a company makes money, they are liable to pay tax to the government. Telecom companies charge Interconnect Usage Charge (IUC) but it is not a part of the income which stays with them. They have to pass it to different operators. Thus, this charge only inflates their total revenue. It won’t be fair if the government taxes a telecom company on this inflated number. Hence, the total gross revenue is adjusted downwards which is known as Adjusted Gross Revenue.

Where it All Began

After 1994, telecom companies were allowed to operate in a fixed license system which was very expensive. From 1999, the government allowed the telcos to migrate from the expensive license-based model to the revenue-sharing model. This model helped the company to share a part of what they earned rather than paying out a high fixed amount. The payment under the new model was divided into two parts annual license fee (LF) and spectrum usage charges (SUC). The former would be 8% of AGR and the latter would be 3%-5% of AGR.


This AGR was the base of the argument which started in 2005 when the Cellular Operators Association of India (COAI) challenged the definition of AGR calculation that was followed by the government. This leads us to dive deep into the definition given by both the parties and the dispute which continued for a decade and a half.

The “AGR Definition” Dispute

The telecom companies believe that the government should be charging tax from the revenue generated only from the core business and not from other businesses. For example, a telecom company like Airtel will generate revenue not only by providing services in the telecom area but also by selling off its assets or by investing in equities or bonds.

Now, the DoT says that AGR includes the revenue generated by the company as a whole and not only from its core business. They believe that companies are earning revenue only because they are allowed to do business in the country. Hence, they are liable to pay taxes on their total AGR, no matter if it is coming from the company’s core business or the non-core business. 

We bring you a timeline of things that have shaped this whole saga –

October 24, 2019

The judgment day. After 14 years of indecision and uncertainty, the Supreme Court of India announced their mammoth verdict. The SC decided to widen the definition of AGR and include revenues coming for non-core items for taxation. The bombshell was that the apex court has asked the companies to pay all their dues amassing Rs 1.19 lakh crore by 23rd January 2020.

January 23, 2020

Vodafone Idea, Bharti Airtel and others miss the deadline citing poor financial health of their companies. The government also asked DoT not to take any action against the defaulting on payments.

February 14, 2020

As expected, the red-hot SC blasted the Centre, DoT and the telecom companies for not respecting their orders. The apex court declared March 17 as the new deadline for the companies to clear all their AGR dues. 

March 18, 2020

In the past few weeks, telecom companies started clearing their dues but only partially. Supreme Court was asked to give 20 years for companies to clear their AGR dues. The apex court fiercely rejected the idea and also declared that companies won’t be allowed to self-assess their dues. 

June 18, 2020

Supreme Court cooled its stance a tad bit. They asked the companies to present a detailed plan of action as to how they intend to clear their dues. This plan of action should consist of the years that the companies would be asking for and the guarantees they will be giving in the meantime. No allowance for staggered payment would be issued if companies fail to provide adequate bank guarantees and a proper roadmap for payment in upcoming years. 

July 20, 2020

The Supreme Court reserved its orders for the AGR payment timeline. They reiterated that the calculation done by DoT is final and binding. Vodafone accepted the dues levied on them but requested 15 years to pay back the dues. Their counsel stated that the company is in “deep waters”. They even asked the government to retain the Rs 8,000 crore worth of GST refunds for this year.

With all this, the Supreme Court voiced their concern on how they can “rely” on a company to pay their dues in future if they already are in shambles. The next hearing is scheduled on 10th August 2020.

AGR Dues for Vodafone Idea: 

Dues Outstanding: Rs 58,254 crore

Dues Paid: Rs 7,854 crores 

Balance Due: 50,400 crore

Vodafone’s counsel told the Supreme Court that the company is “barely afloat”. If the apex body forces the company for an upfront payment, they will be forced to shut down their operations in India which will directly impact over 1100 employees.

AGR Dues for Bharti Airtel:

Dues Outstanding: Rs 43,980 crore

Dues Paid: Rs 18,004 crore 

Balance Due: Rs 25,976 crore

Airtel has paid 60% of the total dues paid by the telecom companies till now. Several analysts believe that Airtel is in a much better financial condition when compared to Vodafone and will be able to pay its dues soon. Doubts remain on the survival of Vodafone Idea.