The telecom sector's roller coaster over the past four years
2G scam
Former telecom minister A. Raja is seen with a Central Bureau of Investigation official during a raid on his residence in New Delhi on Wednesday (Source:BCCL)
The 2G spectrum controversy was the first nail in the coffin for many telecom companies. At the time there were at least 14 telecom operators in the fray — all fighting for a piece of the pie.
The Union Progressive Alliance (UPA) was accused of undercharging companies for frequency allocation licenses — which is the underlying foundation of creating 2G spectrum subscriptions for phones.
According to the Central Bureau of Investigation (CBI), the loss was pegged at ₹3098 billion.
Cancellation of 122 licenses
Ex minister T.R. Baloo at Patiala house court during hearing of 2G spectrum issue (Source: BCCL)
In February 2012, the Supreme Court of India ruled that the allotment of the 2G spectrum is had been ‘unconstitutional and arbitrary’. Subsequently, it cancelled 122 licenses issues in 2012. According to the court, Andimuthu Raja — the minister of Communications and IT during the auction — “virtually gifted away important national assets”.
Tariff price war 2007 as Docomo enters market
Mr. Ratan Tata during the press conference of Tata Teleservice - NTT DoCoMo alliance announcement (Source:BCCL)
Tata Docomo entered the telecom market in 2007 and triggered a price war offering per second billing and dirt cheap pricing of one paisa.
All the telecom players had to follow suit — from private players like Vodafone and Airtel to the government’s BSNL.
Vodafone retrospective tax still pending
Arun Sarin during Vodafone-Essar Conference in Delhi (Source:BCCL)
In 2012, the Supreme Court of India ruled that Vodafone was not liable to pay any taxes over the acquisition of assets in India. In May that year, the government amended tax laws with retrospective effect.
This means the Vodafone Group became liable for ₹22,100 crore yet again over its deal to buy stake Hutchinson Essar.
The Vodafone Group, through its Dutch subsidiary invoked arbitration under India-Netherlands BIPA and then issued a notice of arbitration of in April, 2014.
Vodafone has maintained that there is no liability and that it will “continue to defend vigorously any allegation that VIHBV or Vodafone India Ltd is liable to pay tax in connection with the transaction with Hutchison and will continue to exercise all rights to seek redress".
Second price war triggered by Reliance Jio
Reliance Jio took the telecom operators by storm when it entered the market in 2016 with its aggressive pricing. By August 2019, it was the largest mobile network operator in India — and, the third largest in the world.
In the process, it forced other telecom players to consolidate down to three main players in the market — Vodafone Idea, Airtel and Jio.
The company’s chase for a half a billion 4G consumers continues and market analysts are hoping that pricing power will return over time.
Adjusted Gross Revenue (AGR) definition by the Department of Telecommunications
On October 24, the Supreme Court upheld the Department of Telecommunications definition of AGR. This means that AGR now includes dividends, handset sales, rent and profit from the sale of scrap in addition to revenue generated from services.
According to earlier estimates by the DoT, Airtel owes ₹21,682.13 and Vodafone will need to cough up ₹19,823 crore.
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