Jio says telcos have capacity to pay dues post SC order; opposes bailout
Billionaire Mukesh Ambani's Reliance Jio on Thursday strongly opposed any bailout to telecom companies at taxpayer's expense, and asserted that telcos should be mandated to deposit their dues within the court-stipulated timeline of three months, as they have the capacity to comfortably clear their liabilities. In a letter to Telecom Minister Ravi Shankar Prasad on Thursday, Jio argued that even an unlikely event of failure of two operators will not have an adverse impact on the sector dynamics given the "existence of vibrant competition including presence of the PSUs" as well as absence of any restriction on entry of new operators.
Jio said it did not agree with COAI's alarmist views that telecom sector will collapse in absence of immediate relief by the government.
It also lambasted industry body COAI for writing to government "under the influence of two of its members in furtherance of their vested interests" and accused the association of acting as a "mouthpiece of two service providers" and harbouring a negative bias towards Jio.
Launching a full-fledged attack on Cellular Operators' Association of India (COAI) for writing ex-parte to the government on the financial distress in the sector, Jio said the body was "blackmailing" to "extract relief from the government" after all legal recourse had expired.
"We submit that the so-called affected service providers have sufficient financial capacity to pay the government dues by monetising their existing assets/investments and by issuing fresh equity in their companies," it wrote in the letter to Prasad.
Jio said it "strongly disagrees with COAI submission that in absence of immediate relief by the government the telecom sector will collapse and there would be unprecedented crisis in the sector as two of the three private operators will be facing extreme financial crisis."
"We submit that COAI has used threatening and blackmailing tone with the government by referring to possible job loss, quality of service loss and loss of investment in the sector and its contentions border on contempt of Supreme Court judgement, especially when the Supreme Court has prescribed three months' time to deposit the due amount," it said.
"COAI is clearly insinuating that if the immediate relief by doing away with all legal financial obligations emerging from the Supreme Court's judgment in adjusted gross revenue case is not provided, the two operators might stop operations. We request the government to strongly rebuff such suggestions and insinuations," it wrote.
Operators face no constraint of making funds available to pay-off their legal obligations, the issue seems to be only with the intent, Jio alleged.
Jio -- the new and the most aggressive member of the telecom clan -- contended that the COAI does not represent the industry and urged the government not to accept it as an association of telecom service providers.
"A plain reading of the COAI letter imminently insinuates and casts unwarranted and undue aspersions against RJIL, when there’s no need or a cause for it any manner whatsoever. This makes the entire effort of COAI, a 'sham' exercise at the behest of and perpetrating the vested interests of the two select members alone," Jio said.
Jio said that its promoters have made an equity investment of Rs 1.75 lakh crores in the sector, whereas equity investment by Airtel and Vodafone-Idea has been inadequate, and added that failure of older operators cannot be blamed on the government.
Jio said that the service providers are themselves responsible for their current condition and pointed out that government should not be obliged to bail them out of their own commercial failure and financial mismanagement. Jio also charged operators of "forum shopping to get a relief by threatening the Government", despite being internally prepared for the situation.
"...we request the Government to reject the COAI demand for a financial relief on the Supreme Court Judgement and their other outstanding liabilities including the spectrum payments etc. and all operators should be mandated to deposit applicable amounts within the three months time period, as mandated by Supreme Court," Jio said.
It suggested that other industry issues of rationalisation of levies and taxes and GST credit could be considered by the government, but urged that that COAI should not be allowed to mix these legitimate issues with its demand for investment infusing financial package for industry.
The Supreme Court last week upheld the government's position on including revenue from non-telecommunication businesses in calculating the annual Adjusted Gross Revenue (AGR) of telecom companies, a share of which is paid as licence and spectrum fee to the exchequer.
While Bharti Airtel faces a liability of around Rs 42,000 crore after including licence fees and spectrum usage charges, Vodafone-Idea may have to pay about Rs 40,000 crore. Jio may have to pay around Rs 14 crore.
