Govt to allow telecom firms to defer payments of future spectrum auctions

In a relief to the telecom industry, currently grappling with the adjusted gross revenue crisis, the government on Wednesday said that mobile service providers would be given the option to defer future spectrum auction payments.

“Considering the stress in the sector, the government has given an option to the Telecom Service Providers (TSPs) to defer payment of the spectrum auction instalments dues for 2020-21 and 2021-22, either for one or both years,” Minister of State for Communications Sanjay Dhotre informed the Lok Sabha today.

On February 26, 2020, Business Standard reported that a deferred payment route for future spectrum-related payments was one of the options on the table.

Meanwhile, DOT is preparing to issue fresh notices to telecom companies asking them how they had calculated their dues linked to adjusted gross revenue (AGR). The notices, likely to be issued this week, have been prompted by the wide gap between payments made by the industry and the government estimates on AGR dues of telcos.

"We have so far received Rs 24,000 crore from the companies, which is way less than the amount that we had derived. They (telecom companies) will have to explain as to how they arrived at their numbers," a senior DoT official said.

In the midst of the AGR calculation controversy, Vodafone Idea CEO and MD Ravinder Takkar again met Telecom Secretary Anshu Prakash on Tuesday. Vodafone Idea has so far deposited Rs 3,500 crore in two tranches to DoT and is still assessing its full AGR dues. According to the government's calculation, Vodafone Idea Ltd owes more than Rs 50,000 crore in AGR liabilities.

Tata Teleservices, on Tuesday, made an ad hoc payment of Rs 2,000 crore towards AGR dues. It had earlier paid Rs 2,197 crore, saying it was the full and final AGR dues payment from the company, against the government estimate of around Rs 14,000 crore.

Bharti Airtel, on February 29, said it had completed assessing the dues related to AGR. According to the company's self-assessment, the dues amount to Rs 13,004 which it has already paid. It has paid an additional Rs 5,000 crore, which the company said could be adjusted against any reconciliation exercise. Government calculations suggest that the Sunil Bharti Mittal-led company owes Rs 35,500 crore to the DoT. The assessment of dues was done for the period between 2006-07 and February 2020.

Last October, the Supreme Court had upheld the government’s definition of AGR, based on which the levies on telecom operators are calculated. The order dealt a blow to the telecom industry, which had for years argued that AGR should only include revenue from core telecom operations. Telecom operators now have to pay dues of the past 14 years with interest and fine.

Telecom industry body writes to govt seeking breather for crisis-hit sector

Cellular Operators’ Association of India (COAI), a body representing the telecom industry, has urged the government to provide relief to improve the health of the telecom sector which is reeling under the adjusted gross revenue crisis.

The COAI in a letter to Telecom Secretary Anshu Prakash, asked for easier terms for payment of statutory dues by telcos, including extension of loans at lower interest rates to cover AGR liabilities, and also fast implementation of floor prices to rescue the troubled sector.

With the telecom industry plunging into a deep and unprecedented crisis, the association has raised an alarm over banks' unwillingness to take any risks with regard to the sector, and asserted the "need to give a clear message to banks that Government is there to support the sector" in their letter.

"Banks are currently unwilling to take any risk with reference to the telecom sector and are constantly asking telecom service providers to reduce their exposures by refusing to issue new bank guarantees or even to renew bank guarantees," COAI Director General, Rajan Mathews said in the letter.

the COAI said that the requirement of financial bank guarantees for securing licence fee payments should be done away with. In case Telecom Department is of the view that financial bank guarantees are needed, the same should be reduced to one quarter of licence fee.

The association also sought an immediate cut in the licence fee levy to 3 per cent from 8 per cent and a reduction in spectrum usage charges.

Citing India's low average revenue per user (ARPU) compared to markets like China, Brazil and Russia, it further said data prices in India are a fraction of those in markets are US, China, Germany, France and others.

"Therefore floor pricing is imperative to ensure the sector is sustainable and in a position to bear the deferred spectrum and AGR dues, while continuing to invest in world class networks," COAI said.

The COAI's letter comes at a timewhen Vodafone Idea has reportedly made it clear to the government that it won't be able to pay court mandated AGR dues in their entirety, unless a bailout is extended immediately.

In all, 15 telecom entities owe the government Rs 1.47 trillion in unpaid statutory dues -- Rs 92,642 crore in unpaid licence fee and another Rs 55,054 crore in outstanding spectrum usage charges.

Of the estimated dues that include interest and penalty for late payments, Airtel and Vodafone Idea account for about 60 per cent.

These dues arose after the Supreme Court, in October last year, upheld the government's position on including revenue from non-core 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.

The Supreme Court, earlier this month, rejected a plea by mobile carriers such as Bharti Airtel and Vodafone Idea for extension in the payment schedule and asked companies to deposit their past dues for spectrum and licences.

Duopoly catches up in food delivery space as Zomato acquires Uber Eats

If the telecom industry runs the risk of becoming a duopoly, the fast growing $4-billion online food delivery space has already turned into a two-horse race. Cab aggregator Uber India’s sale of its food delivery business on Tuesday has clearly set the stage for a Zomato versus Swiggy play.

The signs of consolidation were already there as losses piled up. Last year, Uber India’s rival, Ola, which had earlier acquired Foodpanda, closed down its online food delivery business to move into cloud kitchen services due to aggressive competition.

Seven months later, there’s no room for a third entity in the fight for domination.

In an all stock deal, Uber will get a 9.9 per cent stake in Zomato. According to analysts, the value of the deal is in the region of $350-400 million.

RedSeer data shows that revenues have seen significant growth—up to 150 per cent in 2019—in the food delivery business. But, losses have hit the roof. In many cases, the losses surpass the revenues.

The huge discounts to acquire customers, clubbed with high delivery costs and aggressive promotions, have caused the bloodbath. Even so, the customer numbers are impressive, helping in the subsequent funding rounds.

Indeed, cash strapped companies have always looked for fresh funding to continue to grow. For instance, in the case of Uber Eats, India made up for more than 3 per cent of its global gross revenues in the last three quarters and it already grabbed 12 per cent of the market share. At the same time, around 25 per cent of Uber Eats’ global losses came from India in the corresponding period.

Profitability, a goalpost for investors, has been a mirage in the food delivery business. Even Zomato, backed by Alibaba, has been struggling to make money with its losses rising tenfold in March 2019 to cross the Rs 1,000-crore figure. Its revenues in the same period soared 188 per cent to Rs 1,397 crore.

In an interview to Financial Times, Gaurav Gupta, Zomato’s chief operating officer, had promised the company would be profitable by 2020, and that the group’s cash burn would be 30 per cent of what it was in 2019.

chartThe story is no different for Nasper-backed Swiggy, which saw its losses go up six-fold in FY19 to hit Rs 2,364 crore. But its revenues were on the swing, growing 177 per cent to touch Rs 1,297 crore.

The Uber Eats deal helps Zomato to catapult to the number one slot, leaving market leader Swiggy slightly behind. The company had recently raised about $150 million from Ant Financial and is believed to be looking for a total of $600 million.

The cash burn in the business is directly linked to the high cost of customer acquisition through discounts, especially as companies are increasingly targeting the smaller towns—typically the tier 2 and tier 3 cities. Add to that the inability of the food startups to control the delivery cost—currently at an average of Rs 74.

Even though Zomato expanded food delivery to 500 cities earlier this year, an industry expert pointed out that several of the tier-2 and tier-3 cities are tourist cities. "They have seasonal demand. Often you will find a food business shut down outside of the peak tourist months, which is also not adding to Zomato's business in a good way. The discounts are certainly going to dry up," he said.

There is also the question of what this means for restaurants who do business with these food aggregators. "Between the two of them, Zomato and Swiggy were controlling nearly 95 per cent of the market. So, we don't see much of a change from a restaurant perspective," said Anurag Katriar, president of the National Restaurant Association of India.

According to Sandipan Mitra, founder of Hunger Box (an institutional B2B platform), by acquiring Uber Eats, Zomato will improve utilization of its delivery boys, who will now also deliver orders of Uber Eats customers. This will help reduce delivery costs, Mitra said.”

Reliance Jio overtakes Bharti Airtel to become India's 2nd-largest operator

Reliance Industries Ltd's telecom unit Jio pipped rival Bharti Airtel to become India's second-largest operator by subscribers as of May, government data showed.

Jio, controlled by Asia's richest man Mukesh Ambani, has disrupted the telecom industry in the country since it was launched in 2016, offering cheap bundles and prompting shutdowns.

As of the end of May, the operator had added 8.2 million users since April to end the month with 323 million wireless customers, data from the Telecom Regulatory Authority of India, showed. The data was published on Friday.

Both Vodafone Idea, which was the top operator with 387.6 million customers, and Bharti Airtel lost users over the month.

Reliance Industries is expected to post quarterly results later in the day. The company has been betting big on the unit as it diversifies from its core oil and gas operations.