NEW DELHI: In a letter to telecom and law minister Ravi Shankar Prasad, Reliance Jio has said that the older incumbents— Bharti Airtel and Vodafone Idea, led by a Delhi-based lobby body, the Cellular Operators Association of India (COAI), don’t need any financial relief and have committed gross accounting irregularities by hiding the annual gross revenue (AGR) impact in their books.
The billionaire Mukesh Ambani-owned company also said that the telecom group has used threatening and blackmailing tone with the government by referring to possible job loss and impact on investments. Here is a full text of Jio’s letter–
October 31, 2019
Sh. Ravi Shankar Prasad,
Hon’ble Minister of Communication
Department of Telecommunications
20, Ashoka Road, Sanchar Bhawan
Subject: COAI’s letter to Hon’ble Minister regarding alleged unprecedented crisis in the Telecom Industry
Reference: COAI letter no. RSM/COAI/2019/190 dated 29th October 2019
- This is with reference to the aforementioned COAI letter on the alleged unprecedented crisis in the telecom industry. At the outset, we submit that we do not agree with even a single contention in COAI’s letter, which has been submitted with undue haste without waiting for our view on the matter. In fact, this letter has been submitted by COAI under the influence of two of its members in furtherance of their vested interests.
- We submit that such obstinate behaviour by COAI, despite of Reliance Jio Infocomm Limited (RJIL) requesting it to wait for its views, has compelled us to present our views separately on the matter. Our point wise submissions are captured in following paragraphs.
- We strongly disagree with COAI submission that in the absence of immediate relief by Government the telecom sector will collapse and there would be 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. COAI is clearly insinuating that if the immediate relief by doing away with all 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.
- We submit that the so-called affected service providers have sufficient financial capacity to pay the Government dues by monetizing their existing assets/investments and by issuing fresh equity in their companies. These service providers have stakes in many profitable ventures in the country and abroad and have made multi-million dollars of profits in the countries post investing the proceeds from the telecom business including the regulatory levies withheld for decades. The telecom assets of these service providers have been further divested in their profitable telecom tower ventures like Indus Towers and Bharti Infratel. Moreover, these operators have “Principals” with sound financial positions and they must step in to clear the dues which were withheld by them and utilised elsewhere. Thus there is no constraint of making funds available to pay-off their legal obligations, the issue seems to be only with the intent, which is being manifested by COAI through its letter.
- It is reiterated that COAI does not represent the industry and is just a mouthpiece of two service providers. A plain reading of the COAI letter imminently insinuates and casts unwarranted and undue aspersions against RJIL, when there’s no need or a cause for it any manner whatsoever. This makes the entire effort of COAI, a “sham” exercise at the behest of and perpetrating the vested interests of the two select members alone. These collective actions and omissions clearly justifies the urgent need to question the very existence of COAI as an industry body. We therefore strongly urge the Government not to accept COAI as an association of Telecom Service Providers and its representation should not be considered as Industry representation.
- We further submit that the failure of two operators, even in the unlikely event of it actually happening, will not have an impact on the sector dynamics with existence of vibrant competition including presence of the PSUs and there is no restriction on entry by new operators. Further, there will be no impact on the digitization and Government programs, as these operators, anyway were not investing sufficiently in the sector and have been claiming a financial stress for a long time now and they have not shown any inclination to modernise the networks, as evident for TRAI data in its IUC CP. On the other hand, RJIL promoters alone have made an equity investment of Rs.1.75 lakh Crores in the sector, while equity investment by Airtel and Vodafone-Idea has been inadequate keeping in view the network requirements Therefore, failure of these operators cannot be blamed on the Government.
- The extraordinary scenario painted by COAI in this letter is just a machination to extract the relief from the Government, when all their legal recourses have expired. We submit that these service providers are themselves responsible for this issue, they were aware of the Government’s position and Hon’ble Supreme Court’s position as early as 2008 and 2011, however, in a most cavalier manner they continued to pay Government dues, as per their own interpretation, and are thus fully responsible for the current obligations emerging out of Hon’ble Supreme Court order. Further, we believe that they are internally also prepared for this but are currently just forum shopping to get a relief by threatening the Government, when the talks of perceived global economic slowdown and job-loss are already in the air.
- It is pertinent to mention here that as per the media reports, it is believed that these operators have not provisioned for these possible liabilities, which is binding on them as per Indian Accounting Standards and the Companies Act. We submit that in such a scenario wherein these operators were well aware of such amounts all through the earlier proceedings before TDSAT as well as Supreme Court, these service providers are also in violation of the Indian accounting standards and have wilfully violated all disclosure norms continuously since 2011 by not provisioning for these liabilities. The Government should take cognizance of such blatant violations and take appropriate action.
- It would also not be out of place to mention here that the despite the COAI’s and these two operators continued highlighting of the so-called financial stress, these service providers have chosen to continue with their below cost tariffs, especially when there is no competitive pressure compelling these tariffs. Thus clearly, the financial difficulties of these operators are an effect of their own commercial decisions and Government should not be obliged to bail them out for their own commercial failure and financial mismanagement. In fact, this also point out to the possibility of this so-called financial crisis just being a ruse to get reliefs from the Government.
- We further submit that besides seeking a bail-out package, COAI has again attempted to rake up the issue of merits of AGR case like notional revenue, which has already been settled by the Supreme Court Judgement, to cast slurs on the highest judicial body in the country. We submit that all such objections were argued in detail during the court proceedings and subsequently rejected by the Hon’ble Supreme Court. Further, these operators had the option of simultaneously continue fulfilling their licensing obligations in terms of payment of LF / SUC on the disputed amount, more particularly in view of the Supreme Court Judgement of year 2011. Now, therefore seeking relief on the very same grounds amounts to seeking relief for these operators’ wilful decision of continuing non-compliance by with-holding legitimate government dues.
For ready reference we are reproducing relevant sections from the latest Supreme Court Judgement to elaborate on these points
“188. Before considering the applicability of the decisions above, the factual gamut of the case has to be considered. The demand was raised for the first time in the year 2003 despite the fact that the definition of gross revenue was clear, and as is apparent from the correspondence and the agreement reached between the parties, there was no doubt what constitutes gross revenue. Licensees were aware that these items concerning which they have raised the dispute were included in the definition of gross revenue, as such, they had initially questioned inclusion on the basis of the validity of the definition of gross revenue. The challenge was found to be sans any basis by this Court. The objections raised concerning the validity of the gross revenue, were wholly unsustainable and on the face of it, were liable to be rejected, and came to be rejected finally and conclusively by this Court in the year 2011. After that, again the objections have been repeated to exclude those very revenue items which were held to be included once over an effort has been made to get rid of the definition of gross revenue. The objections which have been raised pertained to the definition of gross revenue for which the court held they are part of revenue. Now, relying upon AS9 standards, an attempt has been made by an indirect method for excluding items, which are expressly included in the definition of gross revenue. Objections are too tenuous, and, as a matter of fact, there was no scope to raise such objections in 2003 itself. Because of the various correspondence which has been referred, it becomes apparent that all these heads are included in the definition of gross revenue, and there is no justification for the licensees to raise the objections and to keep them pending for over two decades.”
“194 …..As the Government has been deprived of the revenue and the licensees have been benefited by revenue sharing regime, in spite of that, they have not shared the revenue. They are bound by the stipulation, which is found to be quite reasonable in the facts and circumstances of the case.”
“198 ……Even as per the case of licensees they were not validly included in definition, now reprobating that, stand has been taken that they did not form part of revenue which is not permissible. No litigant can be permitted to reap fruits on such inconsistent and untenable stands and litigate for decades in several rounds which is not so uncommon but is disturbing scenario projected in very many cases. We have examined the matter upon merits and then aforesaid conclusion indicates frivolous nature of objections.”
- Another irrelevant issue raised in COAI’s letter is the implication of SUC on the AGR for other telecom services. We submit that this is again an attempt to confuse the Government, in order to seek its benevolence. The AGR definition was part of the migration package and post detailed rejection by the Hon’ble Supreme Court judgement, such points have become completely infructuous and should be summarily dismissed.
- Furthermore, COAI displays its own lack of application of mind and negative bias towards RJIL by making references to predatory pricing, an issue that has been settled in all legal forums. We submit that such lack of imagination and insistence to keep following the approach of agitating settled legal issues is a hallmark of COAI and these operators. It would not be out of place to mention that this approach alone led to this so called financial disaster in AGR case as well.
- We submit that COAI’s intent of using this as an opportunity to seek non-enforcement of the Supreme Court judgement and asking for relief is strongly objected by RJIL. The Judgement of Hon. Supreme Court is final and to be implemented as law of the land. These operators have capacity and enough monetisation possibilities to comfortably pay government dues.
- In view of the above, we request the Government to reject the COAI demand for a financial relief on the Hon’ble Supreme Court Judgement and their other outstanding liabilities including the spectrum payments etc. and all operators should be mandated to deposit applicable amounts within the three months time period, as mandated by Hon’ble Supreme Court. It will not be out of context to mention that any such package which prima facie appears to mitigate perceived financial strains, if granted, is likely to raise similar demands from other sectors such as aviation.
- Further, we submit that the Government may consider the other industry issues of prospective rationalisation of levies and taxes as envisaged in NDCP-2018 and GST credit separately and not permit the COAI to intermix the investment infusing financial package for industry by mixing it with the legitimate License fee and SUC obligations arising out of past conduct of operators.
For Reliance Jio Infocomm Limited,
Kapoor Singh Guliani
- P.K.Mishra, Principal Secretary to Hon. Prime Minister, South Block, New Delhi 110001.
- P.K.Sinha, Principal Advisor to Hon. Prime Minister, South Block, New Delhi 110001.
- Amitabh Kant, CEO, Niti Aayog, New Delhi
- Rajiv Gauba, Cabinet Secretary, Rashtrapati Bhawan, , New Delhi
- Anshu Prakash, Secretary(T) , Department of Telecom, Sanchar Bhavan, New Delhi 110001
- Atanu Chakraborty, (Secretary) Ministry of Finance, Department of Economic Affairs, New Delhi
- Anoop Kumar Mendiratta, Law Secretary, Shashtri Bhawan, New Delhi
- P.K. Sinha, Member (Finance), Department of Telecom, Sanchar Bhavan, New Delhi 110001