Bharti, Vodafone should be hauled up for wilful legal disobedience, dues collected

Representative image

CNBC Awaaz

Sunil Bharti Mittal's net worth of $8.1 billion comes primarily from his family's 41 per cent stake in Bharti Airtel Ltd, India's second-largest provider of mobile services. A cursory look at Bharti Airtel's growth path over the past decade and a half (see table below) reveals how debt-fuelled expansion and the strategy to deny paying the government its legitimate dues helped the company. The rise in the company’s market value, in turn, helped Mittal, 62, climb to the upper echelons of Asia's wealthiest. Ditto Vodafone-Idea.

Bharti Airtel and Vodafone Idea, having lost a decade long battle with the government in the Supreme Court, are now hell bent on convincing the government, public sector banks and the lay audience that their complete lack of financial planning, reckless capacity expansion and a wilful disregard of the law of the land should be pardoned. Both telecom service providers (TSPs) owe at least Rs 80,000 crore to the government as past dues, interest and penalty related to sharing of revenue under licence conditions.

Bharti and Vodafone collectively control two-thirds of India's booming mobile market consisting of about one billion customers. Both have also hijacked the sector's mouthpiece -- the Cellular Operators' Association of India, which speaks their legalese. Their missives to the government that the sector is in dire financial straits  and that both companies would buckle under is the furthest from the truth. What both want excused is an intentional legal strategy that abused a sovereign contract that guaranteed access to the world's most under-penetrated mobile market in exchange for a minuscule percentage of revenue to the exchequer. The government planned to use these funds to build hospitals, roads and fund public services in one of the world's poorest nations. Instead, it got saddled with a legal battle spanning the sector regulator: TRAI; the telecom sector's legal authority: TDSAT and the Supreme Court. The government won the legal battle at all three.

As a consequence, the top court directed Bharti Airtel to pay around Rs 50,000 crore and Vodafone to disgorge around Rs 40,000 crore to the government as legitimate revenue share, penalties and interest over the past 15 years. The 153-page judgement also lambasted both TSPs for employing diversionary legal tactics to deny the government of its lawful portion.

For nearly a decade since 2003, Bharti enjoyed the financial fruits of being India's most desired listed telecom player by investors of all hues. Bharti's top line surged from Rs 3,055 crore in the year to March 2003 to over Rs 96,000 crore by March 2016. Bharti's market value jumped to Rs 191,000 crore (as of November 1) from Rs 6,123 crore in March 2003. But also take a look at how debt ballooned from low-four digit crore rupees in 2010 to a colossal Rs 1,08,235 crore in 2019. PSU banks were the first point of halt for both Bharti and Vodafone to fund their debt-laden expansion in India and overseas. Not only did they use dues owed to the government in funding this expansion, they also risked the financial health of PSU banks and their investors by not fully providing for liabilities on their balance sheets. And now, COAI parrots their line in demanding that Bharti's and Vodafone's deliberate wrongdoing be pardoned or at least diluted, never mind the damning judgement from the Supreme Court.

What the government should do is to collect legitimate dues from these TSPs as directed by the Supreme Court and use these precious funds to boost slowing growth in the economy. Any misstep would mean scores of other industrialists, who have willfully created trillions of rupees as unpaid debt, standing at the Finance Ministry's doors seeking pardon. It would also amount to disobeying the Supreme Court.

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