India's telecom sector has 3 major players i.e. Jio, Airtel and Vodafone Idea.
- Jio received a spectrum at a much lower price than Airtel and Vodafone Idea. So Jio has a strong balance sheet.
- Airtel needs some help. If it pays all its dues, it will be left with no cash to run the company. So Airtel will collapse if the government insists all dues be paid immediately. However, if Airtel is given time to repay its dues and banks are asked to continue lending to Airtel, then Airtel will survive.
- Vodafone Idea has the biggest problem. Its liabilities exceed its assets. The parent company has refused to pump in more cash. So now, unless it receives some help from the Indian government, it will likely liquidate. The government will have to forgive some of the taxes recoverable and ask banks to infuse more cash at a concessional rate.
But, how did we come to this stage? The key reasons why Indian telecom failed are
- TRAI interference with the Telecom sector. In other countries, the competition determines the prices. In India, TRAI forces telecom companies to charge fixed rates for IUC, number portability, etc. This causes a huge loss to telecom companies. The role of TRAI should be advisory only. TRAI cannot levy penalties on any telecom company. The competition will determine prices in India, like in other countries.
- Jio was given spectrum at a lower rate than others, in a very questionable manner. The government should give concessions to competitors of Jio to make up their loss. Also, the government should hire tax experts and ensure JIO is paying all taxes due to it. e.g.
- JioPhone is sold without paying all taxes because on paper it is "lent" for 3 years. But, in today's world, which mobile lasts more than 3 years. So JioPhone is sold without paying all taxes due.
- Jio Setup box is also lent for many years for home internet access. If it is "sold", then more taxes will have to be paid by Jio to Government.
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