- The government has released a draft telecom law to replace three old bills, one of which is more than a century old.
new telecom billThe primary focus remains to protect consumer interests and ensure competition in the industry at a time when concerns about a Jio-Airtel duopoly are widespread.
- Analysts suggest that while the draft bill gives the government the power to ensure the industry remains competitive,
Jioand airtelare likely to continue to dominate the 5G rollout.
The Indian government has submitted a draft of the new telecom law that will replace three existing laws, one of which is more than a century old. Analysts suggest this new bill will help the government ensure India’s telecom sector remains competitive amid duopoly concerns.
There is a growing consensus in the Indian telecom sector that:
India’s telecoms are facing a new bill that will give the government additional powers to ensure competition in the public interest, said a report from CLSA.
However, on a cautious note, the report said that despite these new provisions, “5G led by RJio/Bharti will still be a catalyst for the industry’s final consolidation.”
The new telecom law also proposes important safeguards to protect subscribers and the government in case a telecom provider goes bankrupt – in the current scenario Vodafone Idea is the telco of concern.
While the telco has opted for the modified moratorium on gross revenues (AGR), it will end in FY27 when the government has an option to convert its dues into stock for a 33% stake in the company.
“We believe that these specific provisions will enable the government to deal with any eventuality in the longer term,” said a report from Credit Suisse.
Under the draft telecom law, a telecom provider is allowed to continue its services even if it is in insolvency proceedings. This is in accordance with the provisions of the Insolvency and Bankruptcy Act, which allows resolution professionals to continue the business of the entity.
But in addition to this, the government has also added a specific exception for the telco to continue to use spectrum to provide services even if it does not meet its dues.
“…may allow the licensee to continue to use spectrum provided that revenues are placed in an escrow, with licensee fees and other government levies taking precedence in terms of entitlement to those revenues,” a Credit Suisse report stated, stating of the relevant provisions of the draft telecom law.
And if things get worse, the government has put in place a subscriber safety net – if it is decided to cease operations, the government can instruct other telecom providers to manage the company’s operations and ensure continuity for subscribers.
In addition, the government has also added a provision to defer, write off or convert legal obligations into equity – but this requires ‘extraordinary’ circumstances such as consumer interests and competition concerns.
Not the first time
It’s not the first time a telecom provider has gone through insolvency and liquidation – during the telecom boom of the 2010s, telcos such as Aircel shut down and forced their subscribers to switch to Airtel and Vodafone.
While 6 million subscribers managed to transfer on time, 8 million were left behind – the new provisions to allow existing telcos to manage their operations will come in handy in such situations so that subscribers don’t have any problems with the use of services until the transfer process is complete.
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