Telecom Crisis

Dear Patrons,

Telecom sector has consistently been a positive driver of GDP growth with a share of approx 8% in the current year forecast and continues to be the backbone of the emerging digital economy. Aggregate gross revenue of the telecom industry in 2019 stood at Rs. 2.4 lakh Cr. with a positive outlook of double digit growth. Despite such healthy macro statistics, two of the 4 telecom service providers viz. Vodafone Idea (VI) and BSNL are questioned on the “going concern” basis of preparing their annual financial statements. Interestingly, between the two extremely distressed entities, BSNL is further challenged by continuous adverse remarks from auditors w.r.t. internal controls, unreconciled numbers, inadequacy of information, financial viability and governance, whereas VI is plagued with erosion of equity.

In this incisive article,?CA?Vipin?Agarwal, considering that both BSNL and VI are national assets, attempts to comparatively evaluate the respective merit to deserve a rescue or revival bailout. Outlining BSNL’s strategic positioning, author anticipates that even if BSNL were to draw up a revival plan by monetization of land or infusion of equity, the outcome looks bleak due to absence of requisite management structure and competence to register presence in the fiercely consumer dominated wireless mobile market akin to an FMCG business. He adds that, on the other hand, VI’s strategic presentation clearly elucidates the technical edge it enjoys compared to its peers and the futuristic mapping of tapping the market in line with the emerging trends in global market.

Further, the author highlights that?the Govt. is working out a telecom relief package circling around extending the timelines for payment of AGR / Spectrum dues to ease out the interim cash flow mismatch. Stating that VI has a very genuine and meritorious case deserving relief from the arbitrary and harsh judicial pronouncements, and positing that a modest 10% acquisition of VI’s Equity by Govt. would amount to Rs. 2800 Cr. without entailing any cash outflow due to offsetting AGR dues recoverable from VI, he asserts that?“This becomes a win-win proposition of salvaging a deserving company apart from generating handsome returns juxtaposed to the draconian concepts of Penalties compounded with Interest.”?In conclusion, pointing out that the remedial solutions to BSNL would be hiving-off its business verticals and liquidating the enterprise, he concludes that?“Ease of doing Business” has to journey ahead with the mindset of “business”.

Click here?to read this riveting piece titled?“Vodafone Idea & BSNL – Roadmap to Revival”.

Best Regards,

LSI Team