Industry body COAI on Thursday sought urgent relief measures for the troubled telecom sector, entailing debt restructuring, cut in levies like licence fee and spectrum charges, and release of GST input tax credit locked up with the government.
Industry body COAI on Thursday sought urgent relief measures for the troubled telecom sector, entailing debt restructuring, cut in levies like licence fee and spectrum charges, and release of GST input tax credit locked up with the government. The COAI’s comments assume significance given that hectic parleys continue between the government and industry over liquidity concerns in telecom sector, with Vodafone Idea Chairman Kumar Mangalam Birla Thursday holding another round of discussion with Telecom Secretary Aruna Sundararajan.
“We have been talking all along about the stress in the industry…There is a need for immediate measures, including debt restructuring with longer duration for re-payment and lower rates, reduction in licence fee, spectrum usage charges and other levies,” Cellular Operators’ Association of India (COAI) Director General Rajan Mathews told PTI.
The industry is also looking for refund of excess credit held up in GST, he said. Mathews noted that these measures could help ease the liquidity situation on an immediate basis, and added that a long term relief package for telecom sector could follow subsequently.
Billionaire Kumar Mangalam Birla, head of India’s biggest telecom company has sent an SOS to the government for deferring statutory payments in a sector that is not generating enough cash to even service loans. The Vodafone Idea Chief had also expressed concern over Rs 30,000 crore that is locked up on account of GST payment under ‘reverse charge mechanism’.
Over the past few years, India’s telecom market had become cut-throat where nearly a dozen players jostled for market share, pummelling the call rates to amongst the lowest in the world. Competition has only intensified since 2016, when Reliance Jio Infocomm, owned by India’s richest man Mukesh Ambani, stormed into the market and offered free calls and dirt cheap data. This triggered consolidation in the industry.
Earlier this month, at its maiden earnings announcement as a joint entity, Vodafone Idea reported a consolidated loss of Rs 4,973 crore for the September quarter and announced a fund infusion of Rs 25,000 crore to help it take on brutal competition. Bharti Airtel too has reported a drop in consolidated net profit for the 10th straight quarter as losses on mainstay India business widened due to pricing pressure from aggressive competition.
Overall, its consolidated net profit of Rs 118.8 crore in July-September represented a drop of about 65 per cent from Rs 343 crore in the year-ago period. Airtel’s loss from India operations (before exceptional items) mounted to Rs 1,646.4 crore in the second quarter of the current fiscal compared to about Rs 940 crore in the preceding three-month period. In fact, Moody’s Investors Service recently placed Bharti Airtel’s rating on review for downgrade, following low levels of profitability and expectation of weak cash flow.