Industry Body COAI Warns Of Telecom Catastrophe, Reliance Jio Disagrees

A Supreme Court decision last week forces telecom companies to pay the bulk of Rs 92,000 crore ($13 billion) in overdue levies and interest.

Industry Body COAI Warns Of Telecom Catastrophe, Reliance Jio Disagrees

Jio said it completely disagrees with the intent, tone, contents and connotations of the COAI letter

Highlights

  • Top court last week upheld government demand on adjusted gross revenue
  • That will force telecom firms to pay Rs 92,000 crore in levies, interest
  • Industry body COAI seeks telecom minister intervention, warns of crisis
NEW DELHI:

India's telecom sector and leading players Bharti Airtel and Vodafone Idea will face an "unprecedented crisis" if the government refuses to relax its demand for $13 billion in outstanding dues, according to industry body COAI.

Bharti and Vodafone Idea have been spooked by the Supreme Court's decision last week to uphold a government demand that will force the companies to pay the bulk of Rs 92,000 crore ($13 billion) in overdue levies and interest.

The Cellular Operators Association of India (COAI) has joined the fray, seeking the intervention of the telecom minister in a letter dated October 29, arguing that such payments will lead to a crisis at the companies and cause distress for the sector as a whole.

"Investments could be curtailed, services could deteriorate, jobs could be lost and investor confidence will most definitely be shattered," COAI Director General Rajan S Mathews said in the letter seen by news agency Reuters.

"The impact of this crisis could exacerbate the stress in the industry and potentially be catastrophic for the nation."

The government's telecom department did not respond to a request for comment.

A person with direct knowledge of the matter said Bharti and Vodafone both backed COAI's views in the letter. But Reliance Industries-owned rival Jio, a COAI member, said the lobby group's letter does not represent industry views.

Reliance "completely disagrees with the intent, tone, contents and connotations of the COAI letter", it said in a letter to COAI, which it released to the media.

Jio began operations in late 2016 and is least affected by the Supreme Court ruling because it has only $2 million in charges to clear.

The COAI letter also said that the $13 billion demand could also place in jeopardy the 600 billion rupees ($8.5 billion) of annual payments Bharti and Vodafone Idea make to the government and threaten their ability to service existing debt.

"Such an adverse outcome will trigger a chain of events which will result in disruption to the entire business chain," the letter said, with the COAI seeking a two-year moratorium on payments for airwave spectrum from 2020 to 2022.

India's crowded telecom sector once had more than a dozen mobile operators but consolidation has resulted in only three private players - Bharti, Vodafone and Jio - and two other debt-ridden state companies.

A government source said on Monday that a panel of bureaucrats had been formed to suggest ways to alleviate financial pressures on the sector.

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