India’s Reliance Industries Limited (RIL) controlled Reliance Jio Infocomm wrote to the telecoms minister Ravi Shankar Prasad on Thursday, opposing government intervention for rival carriers Bharti Airtel and Vodafone Idea facing overdues of Rs. 92,000 crores (roughly $13 billion). To recall, the Supreme Court had upheld a demand by the Department of Telecommunications (DoT) to pay the government dues including penalties and interest.
The Cellular Operators Association of India (COAI) had earlier written to the telecommunications minister, warning of an “unprecedented crisis” if the government refuses to relax its demand for outstanding dues. The court upheld a government demand that will force Bharti and Vodafone Idea to pay the bulk of the overdue levies and interest owed by the industry. Jio is also affected by the judgment, but its exposure is much lower.
Jio, the telecoms unit of billionaire Mukesh Ambani-controlled Reliance, said in its letter that fears of a crisis in the industry and job losses were overblown. Rival carriers can monetise their assets, investments or issue fresh equity to pay the dues, it added.
On Thursday, Jio accused the COAI of using a “threatening and blackmailing tone” with the government when it spoke of potential job losses in the sector, a deterioration in service quality and cutbacks in investments.
Telecoms analysts have warned that while Airtel might be able to scrape through if the government presses on with its financial demands, Vodafone Idea could be forced to shut up shop.
Jio began operations in late 2016 with free voice and cut-price data, forcing rivals to match prices and triggering consolidation in an overcrowded sector. Since then, it has typically been at odds with rivals over issues such as interconnection charges, a fee operators pay each other for calls made from one network to another.
Jio, built with an investment of around $40 billion, has won more than 340 million subscribers with its cut-price offerings but has had to pay a high fee to its rivals because they have more customers. Its strongly worded letter comes a day after it publicly accused the COAI of a “prejudiced mindset”.
In its letter, Jio wrote “We strongly disagree with COAI submission that in absence of immediate relief by Government the telecom sector will collapse and there would be an 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, QoS loss and loss of investments in the sector and its contentions border on contempt of Hon’ble Supreme Court Judgement, especially when the Hon’ble Supreme Court has prescribed three months’ time to deposit the due amounts.”
The letter by Jio to Prasad adds, “COAI is clearly insinuating that if the immediate relief by doing away with all the legal financial obligations emerging from the Hon’ble Supreme Court’s Judgement in AGR case is not provided, the two operators might stop operations. We request the Government to strongly rebuff such suggestions and insinuations.”
Jio adds, “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.” Another telling quote from the letter was Jio’s contention that “COAI does not represent the industry and is just a mouthpiece of two service providers.”