Vodafone Idea chairman Kumar Mangalam Birla on Thursday met the telecom secretary Aruna Sundararajan and is understood to have discussed the liquidity crunch being faced by the debt-laden industry.
Birla, who was accompanied by former Idea Cellular managing director and Vodafone Idea board member Himanshu Kapania, declined to comment on the half-hour meeting. This is Birla’s second such meeting this month with top officials from the department of telecommunications (DoT). Thursday’s meeting comes after Sundararjan on Wednesday told reporters that no formal proposals regarding a relief package has been submitted by the industry.
In an earlier meeting with officials Birla is understood to have sought government’s help in form of some relaxation in the taxes and dues which industry pays on a quarterly basis to the DoT.
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Sources in DoT indicated that discussions largely centered on problems being faced by the industry, especially the liquidity crunch which is impacting operators who are already locked in a relentless price war over mobile tariffs. Rationalisation of taxes and dues, which amount to as high as 33-37% of revenue, was also discussed. It is believed that Birla again raised the issue of annual spectrum installments and could have urged Sundararjan for some government support.
On telecom industry, Moody’s, in its 2019 outlook, said on Thursday, “Although consolidation phase is largely over, a rational competitive market remains unlikely over the next 12 months as players look to grow and defend share. Low profitability coupled with high capex will keep leverage elevated over the next 12-18 months”. It added that capital spending by telcos due to intense competition will remain elevated.
“Review for downgrade of Bharti Airtel (Baa3 review for downgrade) reflects uncertainty as to whether the company’s cash flow and debt levels can improve sustainably and materially over the next 12-18 months,” Moody’s said.