DoT Fines Vodafone Idea, Bharti Airtel Rs. 3,050 crore, Asks to Pay in 3 Weeks

On Friday, the DoT issued notices to Vodafone Idea and Bharti Airtel to pay a total of Rs. 3,050 in penalties. The department has further issued a deadline of 3 weeks for the payment.

Why DoT is Penalizing Airtel and Voda-Idea?

The penalties were levied on the two telcos after they denied Reliance Jio enough number of points of interconnections, or PoIs, in 2016. Back then, the new telco had seen its QoS decline immediately after the rollout.

Shortly after the DoT issued the notice, an Airtel spokesperson said in a statement, "we are deeply disappointed with the arbitrary and unfair demand based on TRAI recommendations of 2016 relating to provisions of point of interconnect to a new operator". The statement added, "these allegations were frivolous and motivated. Bharti Airtel takes pride in maintaining high standards of compliance and has always followed the law of the land. We will challenge the demand and pursue the legal options available to us".

The penalties come within a fortnight of the government announcing the Telecom Relief Package, a series of reforms to help the sector. In 2016, TRAI had recommended Rs. 1,050 crore as fine for Bharti Airtel, and Rs. 2,000 crore for Vodafone Idea, who were Vodafone India and Idea Cellular back then. Vodafone and Idea merged in August, 2018. The DoT accepted the regulator’s recommendations in June 2019 but had not served the notices till now.

The Three-Way PoI War Between Airtel, Vodafone Idea and Jio

The telcos had allegedly denied Reliance Jio enough PoIs across 21 telecom circles. PoIs, or Points of Interconnection, are important for seamless voice call handover from one network to another.

The four telcos had fought over the PoIs in 2016, shortly before Jio's commercial launch. In 2016, after a lengthy dispute, TRAI had ruled against Airtel, Idea and Vodafone. The regulator had called their actions as aimed at "stifling competition" and "anti-consumer" and "against public interest".

What's more, the sector regulator had felt that the licenses of the incumbents should be revoked; however, seeing that it would cause large-scale consumer inconvenience, the regulator instead chose the highest financial penalty. Therefore, it fined the three telcos Rs. 50 crore per circle.

As such, Vodafone and Airtel's fine totaled up to Rs. 1,050 crore each and Idea's Rs. 950 crore (Idea operated in 19 circles). Naturally, the three of the telcos rejected TRAI's findings, dismissing any claims of violating rules. Vodafone went as far as moving Supreme Court against TRAI's findings - a case that is still ongoing.

The DCC Verdict in 2019

Back in 2019, during the verdict, the DCC went with the majority and backed the TRAI recommendations. However, there were two members, out of the 7 in the DCC, who opposed the fines, arguing that instead of the other three, DoT should fine Reliance Jio. Another member had advocated for "softening the blow" by allowing a moratorium, and staggered payments over 15-20 years.

Possible Options for the Telcos

This comes as a blow to both Airtel and Vodafone Idea, as their shares tanked shortly after DoT issued the penalties notice. Therefore, as the Airtel spokesperson said, the telcos will seek to challenge the move in a court of law. Although Vodafone already has a case regarding its own penalty in the SC, it might seek to take Idea's penalty into account as well with the case.

Both the telcos have seen cash pinches over the last few quarters, but none more so than Vodafone Idea. The third largest telco has seen its market share shrink, as it loses ground to both Airtel and Jio. As per the June quarter report, the telco only had Rs. 920 crore in cash reserves. Therefore, it becomes rather tricky for them to pay Rs. 2,000 crore within the next three weeks.

For now, there are no indications of compliance from the telcos.