 After this discussion was recorded, Vodafone CEO Nick Reid did an about turn and said journalists had quoted him out of context. He wrote a letter to Prime Minister Narendra Modi and Telecom Minister Ravi Shankar Prasad on Wednesday the 13th of November saying his company remained committed to India. Reid's statement came after the government expressed its strong displeasure at his reported comments at a press conference in London on Tuesday. However, the reality on the ground has not changed. Even as the Department of Telecommunications sent notices to companies like Airtel and Idea Vodafone asking them to pay their dues, the share prices of the two companies collapsed on Thursday. Hello and welcome to NewsClick. Today we are going to discuss the mess that we seem to be seeing emerging in the telecom sector as well. This of course is on the heels of a very bad quarter which seems to have recorded very little growth if not a negative growth. Parujay, looking at the industrial sector the picture is not rosy but when you talk of the infrastructure things seems to be even worse. You are being very very cautious when you say things are not rosy things are in a very very bad shape. Exactly but when you compare it to what we are talking about is the infrastructure sector and infrastructure I've been really from what is called conventional infra from housing to roads to power, steel, cement. Then you come to things like telecom and power sector. This is really looking pretty dismal and in this telecom currently is in a huge crisis. Vodafone CEO announcing that their net worth in India is zero and they have no intention of putting any more money into it and they are going to let it collapse if things continue like this and they don't seem to be willing to pay what the Supreme Court has levied as what is owed to the government, terms of what is the share of the gross revenue which is really the license fee and various other penalties besides for not paying this money. What is the picture of the telecom sector as a whole? Who are the players and what is the way that it is looking to go? You asked me a number of questions so let me break it down into three or four parts. On Tuesday, the 12th of November, Nick Reid, the chief executive officer of Vodafone worldwide, he at a press conference, at a media conference in London said that they are not going to invest anything more in India because they have nothing. They have nothing. They said we are in a bad shape. The value of our investments is zero or somewhere there and let me read out two rather colourful quotes which were sort of selectively quoted in the Indian media but they are very, very colourful quotes. Now, Mr. Reid said either they, I presume he means the government, he said either they should take their boots of the industry and allow it to better compete against Mukesh Ambani on 5G, meaning fifth generation spectrum or Vodafone idea that's the merge entity is destined for a potentially chaotic final act with potential repercussions for India's international standing. Now, that's a very, very strong, any names Mr. Mukesh Ambani. Now, another quote from Mr. Reid. Throughout, dot, dot, dot, Indian official dumb welcomed Vodafone with all the warmth of a Himalayan mountain top. It has been in court since the moment it arrived that is 2007 and used as soft targets by politicians and tax men. The destruction of value has been complete. Now, I mean, he's talking then, you know, of the income tax dispute, the retrospective amendment to the Income Tax Act. But let's, I mean, what he said is that there's not been the regulation has not been supportive. And what has come as a kind of a final blow? Literally the last nail in the coffin or the last straw on the camel's back, if you like. What's the 24th October 2019 judgment of the Supreme Court by a bench headed by Justice Arun Mishra, which sought to define what you could include in the license fee. The gross revenue and from there you adjust the gross revenue, the adjusted gross revenue. And we can talk about it in greater detail. The short point is just on the whole issue of revenue, the industry has to cough up an estimated 93,000 crores in 90 days. That's the end of January. Now, of this amount, the two biggest chunks is Airtel, Bharti Airtel, 42,000 crores, an idea of Vodafone about 40,000 crores. By way of contrast, Reliance Geo's dues are about 13.35 crores. Yeah, but Paranjai, if we leave that part out, because Geo enters much later, this is really essentially a battle over what is the license fee. And license fees were originally in terms of revenue share and therefore what is adjusted gross revenue. And it's a battle which has continued in the courts for about 10, 15 years. 15 years, at least 15 years. And that's also the reason why the accumulated loss is so high. But I've come to the other point issue that this still would not have been such a huge blow except for the fact that after the entry of Geo, both Vodafone as well as Bharti has been forced to reduce prices. And essentially, Geo has been charged by these two players as well as BSL of actually introducing what's called in technical terms predatory pricing. Which predictably Geo denies, and we can talk about that as well. No, but predatory pricing would be that in a regulated market, if you say my voice is free and others have to pay or are charging a customer revenue in terms of prices for voice calls, of course there is an argument. I'm not going to say who's right or wrong. There's an argument that's predatory pricing. And the basic issue is that the TRAI has always taken the issue of what's called, it calls forbearance. That means as long as it's good competition, I will not interfere in setting a price level. That is good for the consumer at the end of the day. The argument has always been that predatory pricing is not good for the consumer at the long run. So question is, I will not set a floor but I will only set a ceiling. That was the whole idea of forbearance that we do not see. Let me interrupt you here. And you start from where you left off and then go back a little bit. You see, in the competition commission of India, you can define a predator once that particular entity or conglomerate has a dominant share of the market. Now, until recently, Renancio didn't have it. So now, actually I will say, let me tell you on telecom TRAI, I'm not talking of competition commission here. Telecom, it was also argued that when shall we talk about having a monopoly position. It's not just a dominant position or monopoly position. So therefore, that is not as high as apparently the competition commission shows. And the issue of predatory pricing had come up much earlier. So let me go and look at, you know, in terms of looking at it narrowly and carefully, there is an issue of predatory pricing. Remember, Renancio has now started charging for voice, which earlier it hadn't. There's also something called predatory behavior, which is different from predatory pricing. And as you rightly pointed out, this whole issue of floor, ceiling prices, what's good for the consumer, what's not. Now, let's go step by step. Now, the original disputed amount as far as the, I'm going back to the judgment and the licensing fees concerns was just 23,000 crores. This is why Airtel and Vodafone is saying wave off the interest and the penalty and the interest on the penalty and the interest on the interest. All of which adds up from 23,000 crores to 93,000 crores. It's a huge amount. It goes up by, you know, more than four times. Now, let's take one more step back. You have 13 telecom companies who have served orders. Today, only three are left. I mean, you have reliance. And of course, of course, in the public sector, you have BSNL and that's another story. The rest of the 12 by the merged or they shut down or they filed for bankruptcy proceedings. So now what we are seeing today, remember, the industry is steeped in debt for 7,000 crores. Now you've sold 7 lakh crores. At least what we are seeing is not only 100,000 roughly 92,000 crores, 93,000 crores debt which they're not able to pay or charges they're not able to pay, which is what Vodafone CEO is saying, which also Airtel may also say. But the bigger issue is that these telecom companies, including the companies which you have said have shut down or the banks about roughly 7 lakh crores. Absolutely correct. Now, you have to also understand two or three things that have been happening. The gross revenue that is being earned by the government which peaked at about 2,37,000 crores in 2015 has been steadily coming down. Now, the government too is in a bind. Why? Because now the battle is out in the open, no holes barred. Because Reliance Geo is now saying, telling the government, don't bail out. Idea Vodafone. Don't bail out Bharti Airtel. Why? They are a commercial failure. They financially mismanage their businesses. And further, loss to the exchequer. Further contempt of court. Now interestingly, you must know that for the first time actually in 14 years Bharti Airtel declared a loss. And now we have a panel. A panel and I don't envy those who are on the panel. The cabinet secretary Rajiv Goba, the telecom secretary Anshu Prakash, the finance secretary Rajiv Kumar and the law and justice secretary Anup Kumar Mendi Ratta. He's going to have a baptism by fire because he's the first judge who's actually been promoted to the position of law secretary. But anyway, all kinds of packages. We are hearing a two-year moratorium on spectrum payments. Two-year? Let's sort of stop right now for what is the possible solution the government can offer. At the moment, let's look at what the state of the telecom companies are. One is the telecom sector is 7 lakh crore debt to the banks. It is being asked to pay 93,000 crores out of which the biggest of them, two, Vodafone and Airtel, one says their net worth is zero. Others have declared loss. And can these companies survive? Vodafone has said categorically no. No, Mr. Hasn't said it. Mr. Dekreet said it is so many words that if this happens we are not going to infuse any other equity. No, he said it in so many words. I mean he said it is designed for a potentially chaotic final act. Yeah, so I don't know why you said it has not. He has not. I'm saying as far as I'm concerned he has said it. He virtually said it. If that is so, and remember idea of Vodafone has even as we talk has about 30% market share. It has about 300 million customers. Yes, go on. That if they shut down, BSLL is in crisis without further equity it is very difficult for it to sustain its operations. 70,000 people are living on VRS. It's going to be the bigger soup in terms of extending itself at the moment. Airtel as you said has already announced a loss. So are we handing the entire telecom sector over if this continues and Vodafone really exists on the market? Are we handing over the whole telecom sector to Jio? And Jio has been basically bankroll. Let's put it bluntly. Mr. Mukesh Ambani's deep pockets earned from the oil revenue. Oil, petrochemical, a whole lot of other sectors. And in fact the question is what are the debts of Jio who holds it is a different question. And the reason is why we don't know is because Reliance Industries Limited which is India's biggest privately owned company and a single corporate entity widely diversified as we say from petrochemicals, textiles to telecom to retail you name it. We don't know exactly how much money has come from where. Whether the profits from one sector move to the other. So we can't strictly compare it with the accounts of Airtel and with Idea Vodafone. That's one part of the story. The bigger question is, is this in the interest of the government? And is this in the interest of the consumer? And is it in the interest of the country as a whole naturally? Because if you have a situation where earlier you had 15 players, today you have 3 plus 2 in the public sector which are limping just about. Then if you earlier from a situation of competition or intense competition you had an oligopoly, do you want a monopoly or a duopoly? In my opinion it's clear no. It should not happen because I think at the end of the day it's bad for the consumer, it's bad for the country as a whole. But we'll have to wait and watch. Well, if it becomes a monopoly, wait and watch is a different act. But letting it become a monopoly, that's what you're watching now. So that is the time to intervene. If as government, as regulator, you have to intervene, it is now. Because once it becomes a monopoly, then the only watch you can do is to take it over. And I don't think this government is in a mood to take anything over, let alone tinker with Mr Mukesh Ambani. So if Mr Mukesh Ambani now has a monopoly of the airwaves or virtual monopoly over the airwaves and a virtual monopoly of all the data that's moving around and a dominant share of the content that is moving around in the data through its media outlets. Yes, that's also true. It is also a video monopoly today. That's right. I mean it is one of the biggest plays, if not the biggest plays in many languages, in what you hear, what you watch, what you get to read. All of it, in my opinion, potends a very, very dark future. It is dangerous for India's democracy as well as for India's capitalists, shall we say, if one capitalist becomes so big in the process. It is not even an oligarchy. It's a monopoly and in my opinion it doesn't matter whether you believe in socialism or communism or capitalism. It's bad. End of story. It's terrible. Thank you very much. Apologize for being with us, explaining what's a rather difficult set of facts and also rather dismal statistics. 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