Why have we come to this sorry pass in the telecom sector, earlier hailed as the showpiece of the neoliberal policy of privatising our infrastructure? We have seen how the NPA’s of the banks have ballooned with the private power, coal, and other infrastructure projects. Telecom was held to be the shining example that proved otherwise. Now, only two companies—Jio and Airtel—survive from the large number of private licenses handed to private companies, creating effectively a private duopoly in the telecom sector. In the process, BSNL, the public sector company is being gutted, with its demand for restructuring its loans and infusion of capital for expanding its infrastructure being postponed indefinitely.
The telecom sector has suffered from successive scams related to its licencing of private operators. First was Sukh Ram’s scam of “case by case” handling of licenses in the 1994 auction, with suitcases full of money found in his bedroom. Then we had Pramod Mahajan in 1998 Vajpayee government, violating the private players' contract and converting the license fees promised to revenue sharing. This is the genesis of the current crisis, as the telecom companies took for granted that the government will always bail them out. The telecom companies borrowed from the banks and expanded indefinitely, while not paying the government’s share of revenue disputing what constitutes revenue. The bulk of the huge amounts due today—fully three-fourths—is the interest that has accumulated on the amount that they have refused to pay over the last 10-15 years. Unfortunately for them, the Supreme Court in its 2019 judgement did not buy the private players arguments. Hence the sudden crisis of the private telecom companies, particularly VI.
The problem that any government has in infrastructure services is that if a company sinks, its subscribers suffer. It is the subscriber base that the private companies hold to ransom when it bargains with the government to provide more loans and waive off their outstanding amounts. Failing which, take a part of the equity, infuse more cash, while still leaving them in charge of the companies they have bankrupted.
The crisis of VI, unfortunately, has another consequence apart from the problem of its 270 million subscribers. This is because, with the possible demise of VI in the next few years, we will be left with only two private players, Jio and Airtel. Even the most naive policy planners know the consequences for the country if a vital sector like telecom, the basis of the digital economy, is handed over to a duopoly. The only way to prevent that is to either strengthen BSNL to play the role of a strong third player or to take over VI completely and merge it with BSNL as the state-owned third player. (IPA Service)
CENTRE’S DECISION ON SHAREHOLDING IN VODAFONE-IDEA IS CRONY CAPITALISM
PUBLIC SECTOR BSNL IS SIDELINED TO FAVOUR PRIVATE TELECOM COMPANIES
Prabir Purakaystha - 2022-01-21 14:44
The recent announcement by the Union Government of converting a part of what Vodafone-Idea (VI) owes to the government into its shareholding, is another step in the long story of crony capitalism and so-called reforms in the telecom sector. The government has taken a 35.8 per cent shareholding in VI to reduce the two hundred thousand crore rupees that VI owns the government, and postponed payments of the rest for four more years. This will still leave the company in the hands of the two major private shareholders, Vodafone and Idea, who have amended the shareholders' agreement so as to exercise their “promoters rights” even without the requisite shareholdings. The government will still be its largest creditor, along with the public sector banks, while also being its major shareholder.