October 24, 2019
The Indian government charges operators 10% of their gross revenue in license and spectrum fees and the operators would like to pay less.
This resulted in a demand from the government that operators hand over 920 billion rupees (~$13 billion) in underpayments plus interest. That demand found its way to India’s top court, which has upheld it according to a Reuters report. That would appear to be the end of the matter, if the share price hit the operators took is anything to go by.
The issue doesn’t seem to be the fees themselves, although they do seem suffocatingly high, but the definition of ‘adjusted gross revenue’, from which they are derived. It seems safe to assume that the operators reckon that figure is considerably lower than the government does and the courts have gone with the latter.
“This decision has come at a time when the (telecoms) sector is facing severe financial stress and may further weaken the viability of the sector as a whole,” said an Airtel statement to Reuters. “Today’s order has huge impact on two private operators while most of the other impacted operators have exited the sector,” said the Vodafone Idea statement.
The backlog of fees would appear to stretch back quite a few years as the impact on Reliance Jio, which has only been around since 2016, is far less. The bill comes at a very trying time for the sector in India, with the incumbents struggling, state-owned firms needing to be bailed out and even Jio starting to feel the strain. Not the best time for a government cash grab.
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