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Telecom
Friday, February 28, 2020
Telcos Estimate AGR Dues at Half the DoT Demand

Telcos Estimate AGR Dues at Half the DoT DemandAirtel, Voda Idea put dues at up to ₹41kcr against DoT calculation of ₹89kcr, may make part payment today Bharti Airtel and Vodafone Idea have assessed their adjusted gross revenue (AGR) dues at about half the amount that the Department of Telecommunications (DoT) has demanded, likely setting the stage for another dispute between the companies and the government, said people with knowledge of the matter.

Initial calculations at Bharti Airtel peg the dues at ₹15,000-18,000 crore, instead of more than ₹35,500 crore estimated by DoT. Vodafone Idea’s initial computation puts it at ₹18,000-23,000 crore against DoT’s ₹53,000 crore estimate. Cash-strapped Vodafone Idea is likely to pay only a part of the amount in the next few days, said one of the persons. The company had in a statement on Saturday once again warned of the continuing threat to its viability in the absence of judicial relief.

“The reason for the difference in estimates is because even by calculating their AGR according to the Supreme Court verdict of October 24, there are certain errors such as duplication of certain items, as per DoT’s definition,” said the person cited above. “Thus, certain items still don’t make it to the list, and the interest on those items plus the penalties go down.” A news agency reported that Bharti Airtel, Vodafone Idea and Tata Teleservices may pay some of their dues as early as Monday.

Department of Telecommunications to Decide on Next Step Today
Lower principal will lead to a reduction in interest and penalties. Of the DoT estimated dues of more than ₹89,000 crore for the two telcos, interest and penalties account for 75%. “This (the self-assessment) itself is a very tedious process — it requires the companies to open their records in a circle-wise manner for the last 16 years and add those items, the penalty and interest thereof and so on,” said a telecom executive.

DoT may issue fresh notices for the balance dues if the telcos' estimates don't match their own, or take other action against them for not paying up on time, officials said. The course of action will be decided on Monday since the telcos hadn’t paid by the Friday midnight deadline some of the circle offices had set. Some other circle offices had sought 'immediate' payment. Under the rules, DoT can encash bank guarantees submitted by telcos for unpaid dues and can even cancel licences as a final step.

Vodafone Idea and Bharti Airtel didn’t respond to queries. Airtel sources said that the telco's self-assessment shows the dues to be “significantly lower” than DoT's estimates. Bharti Airtel has already raised more than $3 billion through a private placement of shares and an overseas bond issue to meet its AGR obligations.

RIGHTS ISSUE
Vodafone Idea can use ₹2,826 from its ₹25,000 crore rights issue proceeds for AGR payments. In addition, the company can call upon Vodafone UK to cough up ₹8,000 crore towards payment of AGR dues. The telco’s books show cash and cash equivalents of ₹23,114 crore as of December 2019.

The telco also expects about Rs 4,500 crore from the sale of its stake in the Bharti Infratel-Indus Towers merged entity. But that depends on when the merger will close, with the deal already delayed pending government clearances. It also hopes to sell its optic fibre and data centres but those deals may take a while to close as well. The telcos have come under increasing pressure to pay their dues urgently after the Supreme Court on Friday rapped them and the government for non-payment by the January 23 deadline.

The court threatened the telcos with contempt proceedings and personal appearance of their top executives unless dues were paid by the next hearing, which is set for March 17. This prompted Bharti Airtel to say it would be paying ₹10,000 crore by February 20 and the balance — as per its own assessment— by March 16. Vodafone Idea said it was assessing what it could pay as part of its dues and plans to do so in the next few days. However, in the same statement, the company once again warned of the continuing threat to its viability in the absence of judicial relief in the dues.

On Friday, Vodafone Idea chairman Kumar Mangalam Birla met telecom minister Ravi Shankar Prasad to discuss the situation. The telco has been highlighting the negative impact on the telecom ecosystem and the jobs that will be lost if telco is forced to shut. Bharti Airtel, Vodafone idea and Tata Teleservices have been trying to get relief from the Supreme Court on the latter’s verdict of October 24 that widened the definition of AGR to include non-core items. This left 15 telcos facing Rs1.47 lakh crore in dues, with Bharti Airtel, Vodafone Idea and Tata Teleservices the worst hit.

INTERNAL ASSESSMENT
Tata Tele’s internal assessment also shows the dues to be “significantly lower” than DoT’s estimate of nearly ₹14,000 crore, said another person. An email sent to the company didn't elicit a response. After their review petition against the October order was rejected, these telcos filed a modification plea with the apex court, hoping to be allowed to negotiate a longer payment tenure and waiver of interest and penalties with the DoT.

At a hearing of the modification plea on Friday, the top court asked why they shouldn’t be prosecuted for contempt for not paying their AGR dues by the deadline. After being rebuked by the Supreme Court on Friday, the DoT also sent out letters on Friday and Saturday to all telcos, asking them to make AGR payments “immediately,” failing which “necessary action will be taken in terms of provisions of the License Agreements.”(Source: Economic Times)

Samsung to Set Up India’s 1st Mobile Display Plant

Firm to invest over ₹3.5k cr in plant near Delhi, may expand it later to make displays for laptops and TVs. Samsung is setting up India's first smartphone display manufacturing unit on the outskirts of Delhi.

The South Korean company is investing more than ₹3,500 crore in this facility in Noida, as per a regulatory filing with the Registrar of Companies (RoC). It could later be expanded to manufacture displays of other devices as well.

The chaebol’s flagship India entity, Samsung India Electronics, has transferred a plot to a group company, Samsung Display, in its existing manufacturing plant area and has given a loan of ₹3,500 crore to meet the investment and working capital requirement for establishing the production unit. As per the regulatory disclosures, sourced from business intelligence platform Veratech Intelligence, Samsung India said it had incorporated a group entity, Samsung Display Noida, “with the principal business of manufacturing, assembling, processing and sales of displays (including their parts, components and accessories) for all types and sizes of electronic devices.”

Samsung said the plant would produce displays of mobile phones and IT display. However, an industry executive aware of the plans said the plant would initially produce displays for mobile phones, but could later extend it to laptops and televisions. The current investment will be enhanced as the capacities increase and Samsung Display sells the component to other brands like it does globally, he said. The first phase will become operational this year itself.

An email sent to Samsung India seeking comment remained unanswered till Friday press time.

This fresh investment will expand Samsung’s play in the component segment, with display panel being one of the largest components by value used in the manufacturing of mobile phones and televisions.

It has recently started the world’s largest mobile phone manufacturing unit in India, at a total outlay of ₹4,915 crore. This enhanced investment comes at a time when the government wants to impose duties on imported displays for both smartphones and televisions to help boost its make in India efforts.

Veratech Intelligence founder Mohit Yadav said Samsung's decision to invest heavily to build cellphone displays in India was a significant boost to make in India. This highlights that Samsung is confident that consumption will increase in India, he said.

ET had written last year that Samsung Display wanted to set up a manufacturing unit in India and that another group entity, Samsung SDI India, was looking to start local production of smartphone batteries.

Samsung India has allotted the plot to Samsung Display for a consideration of ₹92.02 crore as per the RoC disclosures. The ₹3,500 crore loan is for three years.(Source: Economic Times)

Oppo weaves growth strategy around ‘Make in India’ drive

Chinese tech giant Oppo is looking to cash in on the “incredible” opportunities thrown by untapped millennial population in the Indian market and charting out strategies to back the government’s ‘Make in India’ mission by extending support to startups and bringing India-centric innovations.

Keeping ‘Make in India’ mission at the core of its growth strategy, Oppo is aiming to manufacture 100 million smartphone units locally by the end of 2020 and bring world-class technological products that meet the needs of the ever-evolving Indian consumers.

With fast-changing technology landscape in India, Oppo is also shifting its focus towards next generation innovations like 5G and Internet of Things (IoT) to drive its next leg of growth in the country.

On the future course, Oppo India Vice President (R&D) Tasleem Arif told PTI, “India is a promising market when it comes to the roll out of 5G. India’s new National Digital Communications Policy (NDCP) presents a positive vision for the industry and country, with the goal of creating the digital infrastructure that supports the next generation of digital services.”

At Oppo, he said, work on 5G network has already begun at its Hyderabad research and development (R&D) centre and as soon as the ecosystem gets in place, the company will bring in innovative 5G technology-enabled smartphones.

5G network is being seen as the next battleground in the telecommunications space where service providers and equipment manufacturers are waging an all-out war to prove their dominance in the entire mobile ecosystem.

In the backdrop of muted smartphone sales in recent months in many countries, India becomes even more important for manufacturers in their global growth strategy as the Indian market with its large untapped millennial population presents an exciting opportunity for these players.

Oppo India Vice President (Product & Marketing) Sumit Walia said, “There are half a billion users still on feature phone that will potentially upgrade to smartphones, and that coupled with 4G penetration, availability of affordable devices and cheap data along with a strong ecosystem will continue to help the industry grow.

As per the latest IDC report, Oppo has achieved a market share of 11.8 per cent in Q3 2019, he said, adding that the company has also doubled its sales with an overall solid 92.3 per cent year-on-year growth. It has become the second-largest vendor in the fast-growing $ 300-500 segment following the recent launch of Reno2 series.

Walia further said that Oppo would like to pace up growth with “a continued focus on ‘Make in India’ and we expect to manufacture 100 million units by the end of next year”. Also, the key focus areas would be the development of differentiated form factors and meaningful innovation for all, while delivering premium experience to consumers, he added.

Acknowledging India’s importance in Oppo’s scheme of things going forward, Arif said the company is “committed to the development of the country and recognises that innovation and entrepreneurship are crucial for the future growth of the economy. Our commitment to ‘Make in India’ is a shining example of our endeavour to co-opt with the local authorities in achieving their objectives“. (Source: The Hindu Businessline)

BSNL to open VRS window on Monday; October salary not credited, yet

BSNL is expecting a likely savings of about ₹7,500 crore in case 80,000 employees opt for VRS. State-owned Bharat Sanchar Nigam Ltd (BSNL) is slated to accept

Applications for the voluntary retirement scheme (VRS) starting from Monday, even as the public sector unit (PSU) defaulted on October salaries. BSNL plans to offer VRS to employees above 50 years of age and expects at least 80,000 personnel to avail it.

“The 30-day VRS window opens on Monday, and the management and unions have requested employees eligible for it to submit applications. Under the proposed VRS formula, employees will get 100-125 per cent of the salary for remaining years of service, including pension, based on the retiring month wage,” a source close to the development told BusinessLine. “It would take at least three months to implement the VRS,” the source said, adding the implementation of the scheme will not affect the company’s services.

BSNL was expecting a likely savings of about ₹7,500 crore in case 80,000 employees opt for VRS. BSNL employs nearly 1.59 lakh personnel as of date, of which nearly 1.06 lakh are aged above 50 (eligible for VRS). The company’s employee costs stood at ₹14,492 crore in 2018-19.

In case the VRS turns out to be a success, then the PSU might not reduce the retirement age to 58.

Retirement age

The proposal under the revival plan was to slash the retirement age to 58 from the present 60 after the implementation of VRS.

As part of the revival package, the Centre will direct all government departments and State governments to take BSNL landline and broadband connections. As and when 4G rollout happens, BSNL mobile services also will become mandatory for government departments, another source said.

BSNL is also making it mandatory for its own officers and staff to use a BSNL connection.

Salary delay

Separately, the company has defaulted on October salary, which was to be credited on Thursday. This time also the salary is expected with a 15-20 days delay.

“The salary delay will continue for another 3-4 months, and till the revival package is in place and other issues including the VRS are ironed out,” another source said.

BSNL has also launched a new scheme offering 6 paise cashback for voice calls. The scheme, a festival offer, is limited to wireline, broadband and Fibre-To-The-Home (FTTH) customers. Subscribers making calls of 5 minutes or more would be credited with 6 paisa cashback.

Meanwhile, both BSNL and Mahanagar Telephone Nigam Ltd (MTNL) received Department of Telecommunications approval for their revival plans. The letter dated October 29, approved reducing employee costs, administrative allotment of spectrum for 4G services, debt restructuring through bonds, monetisation of assets and merger of BSNL and MTNL. (Source: Hindu Businessline)

Airtel Urges Trai to Postpone Scrapping of IUC

Bharti Airtel has urged the telecom regulator to postpone the scrapping of interconnection usage charges by at least three years from the planned January 2020 deadline, saying traffic symmetry between networks has not been achieved and over 400 million mobile users continue to use 2G networks, people close to the regulator said.

“The (London-based) GSMA too has predicted that 12-13% of customers will continue to use 2G handsets till 2025,” Airtel said in its submissions to the Trai, which had sought comments on a proposal to defer the introduction of a zero interconnection usage charges regime.

“Traffic from the 4G-only operator continues to be on the higher side, both in terms of absolute magnitude and percentage,” Airtel said, adding that this indicated “traffic symmetry has not been achieved.”

Reliance Jio Infocomm, which operates India’s only nationwide 4G network, has opposed the move to defer the zero-IUC regime. In its submission, it said Trai’s proposal was created to incentivise Airtel and Vodafone Idea, which are yet to fully upgrade their networks to 4G standards. Jio said any deferment of the regime would adversely impact Trai and the government’s credibility, besides reducing investor confidence in the telecom sector and discouraging foreign and domestic investment.

Jio is currently a net payer of IUC, while Airtel and Vodafone Idea are net recipients, underlining the reasons for their respective stands.

At press time, Airtel did not reply to ET’s queries. Submissions of Vodafone Idea, which has historically opposed the zero-IUC regime, were not immediately available.

Airtel said in its submissions that “despite the massive deployment of 4G, the assumption regarding adoption of technologies is not proven.” It said 49% of its customers still use 2G handsets and only 17% of the company’s voice traffic was carried on 4G-VoLTE in June 2019 even 2-3 years after deployment of the upgraded network.

Trai’s latest IUC review comes barely two years after it cut the charge by 57% to six paise a minute and ordered its end from January 2020. Its view was that by end 2019, a majority of operators would move to packet switched technologies and the cost of terminating calls would be small. (Source: Economic Times)

RCom Asks Ericsson to Refund ₹ 579.74 Crore

Says telecom gearmaker has to be treated on par with other operational creditors. Reliance Communications has asked Ericsson to refund ₹579.74 crore that the bankrupt telco had paid it, saying the Swedish telecom equipment maker had to be treated on a par with other operational creditors. It also said the money paid must be returned because the insolvency resolution process that Ericsson had initiated against RCom had resumed.

The demand may resurrect a legal battle and delay the insolvency process, given that the payment by RCom was made on Supreme Court’s directions. “Ericsson should not be allowed treatment which is any different than the treatment that shall be accorded to the other operational creditors… either in terms of a resolution plan subsequently approved, or, in the event of liquidation,” Deloitte, the resolution professional overseeing the telco’s affairs, said in a letter to Ericsson last week. ET has reviewed a copy of the letter. “Ericsson is requested to hereby initiate a refund of the total sum of the monies received by it,” the RP said in the letter.

Ericsson may Seek Minutes of CoC Meeting
The letter requires Ericsson to join the queue of operational creditors including tower companies, equipment vendors and the Department of Telecommunications, which have claimed Rs 88,000 crore in dues, of which over Rs 70,000 crore had been verified.

According to the company’s lenders, payment to an operational creditor, in this case Ericsson, made while RCom is in insolvency is against the Insolvency and Bankruptcy Code. Financial lenders including State Bank of India, China Development Bank, Standard Chartered Bank, Deutsche Bank and DBS Bank, which have raised claims of up to Rs 57,382 crore, of which Rs 49,223.88 crore had been verified, get preference over operational creditors upon resolution.

RCom keeled over under Rs46,000 crore of debt and is undergoing insolvency proceedings with its assets up for sale.

Ericsson plans to ask the RP to send the minutes of the Committee of Creditors meeting that passed the resolution demanding the refund, according to people aware of the development. The company will then take a call on approaching the Supreme Court, which decided on the matter in February. Mails sent to Deloitte didn’t elicit a response, while Ericsson declined to comment.

Ericsson petitioned for RCom’s bankruptcy in September 2017 over non-payment of dues worth over Rs 1,500 crore. The bankruptcy court admitted the petition but, under RCom’s appeal, the National Company Law Appellate Tribunal stayed the insolvency order and a settlement with Ericsson was chalked out. ( Source: Economic Times)

Kuwait to issue virtual telecom operator licence

Kuwait to issue virtual telecom operator licence. Kuwait is to issue a virtual telecom operator licence, effectively creating a fourth player in a market serving roughly four million people.

Virtual network operators do not own the networks they use to provide communications services but instead lease capacity from conventional operators, usually paying them a percentage of their revenue as well as fees.

Kuwait's Communications and Information Technology Regulatory Authority has issued a request for applications for the licence, according to a document seen by Reuters.

State news agency KUNA also reported a licence would be granted.

Applications must be submitted by Nov. 14, 2019 and the selected application will be announced by Feb. 6, 2020, the document shows.

The applicant will have to partner with a company that can provide it with the technology, know-how and operational and management experience. The partner will also own at least 40% of shares and have a five-year management agreement.

Kuwait's current telecom providers are Zain, Ooredoo, and Viva.

Kuwait's existing telecom providers, as well as anyone holding 25% or more shares in Kuwaiti telecom companies, are not allowed to apply.

Foreign ownership would be subject to Kuwaiti law, which restricts non-Kuwaitis to minority ownership. (Source: ETTelecom)

Huawei asks India to take 'informed and independent decision' on 5G trials

The US has banned Huawei, the world's leader in telecom equipment and the number two smartphone producer, over concerns of security. Huawei has urged India to make an "informed and independent decision" on permitting its 5G trials in the country as the Chinese telecom giant reeled under pressure following the US ban.

The US has banned Huawei, the world's leader in telecom equipment and the number two smartphone producer, over concerns of security and Washington has been pressuring other countries to restrict the operations of the Chinese telecom firm.

India, however, is yet to take a call on whether it intends to place curbs on Huawei or allow the Chinese telecom equipment maker to participate in the upcoming 5G trials, that are scheduled to commence in 100 days.

"The Indian Government or any other country must take an independent view to protect its own networks and data through its own standards, test mechanisms and policies. It is important to address cyber security risks through an evidence and fact-based approach, introducing checks and balances with a monitored participation rather than banning out of fear," Huawei, which is based in Shenzhen, said in a statement to PTI here.

Earlier this month, Telecom Minister Ravi Shankar Prasad said India has its security issues over allowing Huawei to participate in the upcoming 5G trials.

"We will take a firm view on it. There are also security issues...it is not only a matter of technology, as regard their participation in 5G is concerned...Participation of 5G is not conditional upon the trial being started. Whether a particular company is allowed to participate or not, is a complex question including security issues," he had said.

Commenting on the minister's remarks, Chinese Foreign Ministry last week said that India should take an independent decision without being guided by the US ban and provide an "unbiased and non-discriminatory" environment for the Chinese businesses.

In its statement, Huawei said that it received full support from India for about two decades for its operations and obtained Department of Telecom (DOT) invitation to conduct 5G trials.

"In India, Huawei has received full support and confidence of the Government during our near 20 years operations in the country," it said in response to questions over the security concerns raised by Prasad.

"Over the past few months, we have proactively engaged with the Indian Government and their feedback has been positive. We are confident that the Indian Government will make an informed decision on 5G, one that provides a level-playing field to all vendors," it said.

Huawei has a long-term strategy for India and will keep investing there in people, business and operations, it said.

Huawei said it recognised the importance of India as a talent base way back in 1999 when it set up its largest overseas R&D centre in Bengaluru.

"Today, with almost two decades of operations in India, India is one of the largest and most localised presence outside China for Huawei," it said.

"We are committed to bringing world class ICT solutions and products through our wide spread presence in India encompassing the R&D Centre, Global Service Centre, the Innovation and Demo Centre, and a nationwide presence with regional and circle offices including the recently launched OpenLab in Gurugram," it added. (Source: Economic Times)

Telecom tower industry seeks more relief, priority lending

Digital India providing e-services to the common man depend entirely on the availability of telecom infrastructure and any levy on such nation-building installations will up the cost of such services.

The telecom tower industry has urged the Finance Ministry to allow accelerated depreciation rate of 65 per cent on batteries, 20 per cent funding through External Commercial Borrowings (ECB) for the working capital and inclusion of telecom towers in the priority sector for lending by banks. The industry uses lithium-ion batteries, which have an average life of 3-5 years.

A higher depreciation rate for these batteries can help higher adoption of these batteries, which can decrease dependence on diesel for power back-up.

Diesel adds to the higher cost of production for the tower companies.

Accelerated depreciation is a method whereby an asset loses book value at a faster rate than the traditional straight-line method. Generally, this method allows greater deductions in the earlier years of an asset and is used to minimise taxable income.

Apart from these key demands, the Tower and Infrastructure Providers Association (TAIPA) in its submission to the Finance Ministry, said it wants inclusion of the telecom infrastructure service providers in Section 72A in the cases of mergers and amalgamations.

As the tower industry is an inseparable part of telecom services, the specific inclusion will bring parity for the tower companies with telecom operators and other key industrial sectors. The benefit of Sec 72A was introduced to telecom operators in FY 2002-03 with a view to encouraging rapid consolidation and growth in the sector.

Before that, each telecom operator used to set up its own towers to cater to its own need for passive infrastructure (telecom towers, shelters, power back up) services. Accordingly, the concept of TISPs was not envisaged in FY 2002-03, when the benefit of Section 72A was extended to the telecom sector.

Section 72A of the Act allows accumulated losses of amalgamating company to be carried forward and set off in the hands of the amalgamated company.

Currently, the carry-forward of losses is limited to industrial undertakings or ships, hotels, aircraft or banks. The term "industrial undertaking" has been defined to include the companies which are engaged in the business of providing telecommunication services, whether basic or cellular, including radio paging, domestic satellite service, broadband network and internet services, said T.R. Dua, Director General, TAIPA. There have been consolidations in the tower industry in recent times. India's telecom tower industry is expected to see further consolidation after the Bharti Infratel-Indus Towers merger.

The combined entity of Bharti Infratel Ltd -- the tower arm of Bharti Airtel, and Indus Towers, post their merger, will own more than 1,63,000 towers and will create the world's largest tower company outside China.

In the tower industry, if ATC seals the deal with Idea, then the former would operate over 78,000 tower sites in India. State-run telecom operator Bharat Sanchar Nigam Ltd (BSNL) owns 66,000 towers.

TAIPA also seeks to amend the definition of "plant and machinery". "Plant and machinery mean apparatus, equipment, machinery fixed to earth by foundation including telecommunication tower and shelters, that are used for making outward supply and include the term 'telecommunication tower' for the purpose of Input Tax Credit," it said.

According to TAIPA, the tower industry is expecting to install around 25,000 towers in the coming FY with around Rs 1.25 lakh taxes paid on each. The current situation could result in an increase in the cost of providing the telecom service.

The Association rues that under the Central Goods and Services Act, 2017 (CGST Act), telecommunication towers have been specifically excluded from the definition of "plant and machinery" provided in the explanation to Section 17.

"Digital India, smart cities, providing e-governance services to the common man and other flagship programmes of the government depend entirely on the availability of critical telecom infrastructure and any tax/ levy on such nation-building installations will ultimately increase the cost of the services to the end-consumer. Towers are the backbone of the telecommunication industry and any denial of this credit would substantially increase the cost of services to the common man," said TAIPA. (Source: New India Express)

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