- As you are aware, the telecommunication sector is one of the most crucial infrastructural segments in the country’s economy whose health and strength define the direction of our growth. With the advent of revolutionary technology-backed inventions in the field of communication, any country aspiring to be counted amongst the most progressive nations cannot afford to let go of the telecommunication sector to drift away against mounting challenges to stay relevant. As dynamic communication revels in innovations, there are concerns to be addressed when some of the biggest players in the field are struggling for long.
PC: SHUBHADA KHOKALE
- This is where the Union Government should come in to ensure no large-scale disruptions occur. We all know what happened to Vodafone Idea as well as other bigger players like Airtel when the adjusted gross revenue (AGR) issue was thrust upon them. It will amount to an understatement that these telecommunication players are in great distress running their business by incurring huge losses. Against this backdrop, telecom company Vodafone Idea’s governing board opting to make the Government of India the company’s largest equity shareholder to compensate for a delay in payment of dues to the state should be duly considered.
- As if on cue, Tata Teleservices too followed suit. This comes after an industry bailout package offered by the Union Government last September. The package offered a deferment in payment of spectrum and adjusted gross revenue dues. Of course, the interest arising out of the deferred payment could be paid to the Government in the form of equity shares. Needless to mention, the decision of the two companies should be formally accepted by the Government of India. Such a move would entail the Government owning about 35.8% of Vodafone and 9.5% of Tata Tele. Mind you, economic uncertainty looms and the country can ill-afford the collapse of a telecom company with a 23.07% share in the wireless market.
PC: Mahesh Uppal
- This should not be seen as nationalization but to be treated as short-term support to insulate the economy from the cascading effect of a draw-out implosion of a large firm. For years on, Air India continued to receive support from the Government and as such, there is no reason why Vodafone’s Idea should be not considered. The pandemic-induced downturn has rendered the economic recovery uneven. The financial sector hasn’t fully recovered from its bad loan problem either and RBI estimates it could rise to 9.5% of advances in September in a severe stress scenario. Therefore, providing short-term support to Vodafone and Tata Tele is justified as their problems were compounded by an inexplicable apex court verdict on AGR.
- However, the Government of India should keep away from running operations as it has a poor record in the telecom business. Look not far than BSNL and MTNL which have incurred cumulative losses of Rs. 47,508 crores in the last three years alone. Moreover, deferred payment into Vodafone’s equity will provide an opportunity for the company to turn things around as also the time required to bring in new capital and restructure operations. Nonetheless, the real gain from the move will be in insulating the economy recovering from the pandemic-induced shock. Thus, the Government should go ahead with the offer.
