Telecom Minister Manoj Sinha today vowed to save the debt-laden sector in his meeting with industry leaders, including Sunil Bharti Mittal, as incumbents highlighted the financial stress inflicted on them by Reliance Jio.
Minister Manoj Sinha today vowed to save the debt-laden sector in his meeting with industry leaders, including Sunil Bharti Mittal, as incumbents highlighted the financial stress inflicted on them by Reliance Jio. “An inter-ministerial group has been constituted to examine the issues affecting repayment capability and viability in the telecom sector. Their report is expected soon,” Sinha said after a two-hour meeting with the telecom honchos. “…corrective steps will be taken by the government for ensuring orderly growth in this sector in terms of services to the common man,” he added.
Sinha’s meeting with the telecom bigwigs comes amid a raging financial crisis in the telecom sector. The industry is reeling under revenue and profitability pressures, and its debt has risen to a colossal Rs 4.6 lakh crore. Incidentally, officials of State Bank of India were also present at the meeting and are understood to have said that sector is indeed facing financial difficulties with operational profit tanking to Rs 45,000 crore from Rs 75,000 crore just two years back.
They also warned that the sector is staring at a deficit of Rs 80,000-90,000 crore after taking into account the interest payments, loan repayments, and capex requirements. During the meeting, Jio is believed to have dubbed the stress in the telecom sector as a misconception. It said the sector’s operating profit margins at 30 per cent are among the highest as compared to other industries. Jio reiterated the arguments it had made to the inter- ministerial group last week, that large operators should bring in more equity and reduce debt.
Asked about Jio’s allegations that operators were not infusing enough equity, Bharti Airtel Chairman Sunil Mittal quipped, “Please go and look at our balancesheet.” In the meeting, Airtel is learnt to have said that the return on capital has come down from 6 per cent to 3.4 per cent in the last quarter of fiscal 2017. Justifying the revenue dip in telecom sector, Jio is learnt to have said that revenue of state-run operators too had taken a hit in 2002-03 due to the entry of private operators in the long-distance telephony space, and the sector had been affected again in 2008 when new players entered the market.
However, it added, the industry revenue grew subsequently. The incumbent operators and Jio differed sharply over the contentious issue of call connect charges, with the newcomer favouring removal of these rates and incumbents demanding an increase in the current rate of 14 paise/minute. An official present at the meeting said that incumbent operators also pointed to the asymmetric traffic to justify their demand for an increase in the Interconnection Usage Charges.
SBI, which had last week met the inter-ministerial group, supported deferment of spectrum payment with moratorium of 3-5 years and increase in instalments. It also favoured reduction in levies and taxes from the current level of 33 per cent to 22 per cent in tune with global practices. Apart from Mittal and Reliance Communications Chairman Anil Ambani, today’s meeting was also attended by Idea Cellular Managing Director Himanshu Kapania, Tata Sons Director Ishaat Hussain and Reliance Jio Infocomm Board Member Mahendra Nahata. Telenor CEO Sharad Mehrotra was also present at the meeting.
The meeting comes just days after the inter-ministerial group held a dialogue with all telecom companies on the industry’s financial stress and measures that can be taken to ease the situation. Telecom Regulatory Authority of India too had met the telecom companies last week, where Idea Cellular suggested imposition of a minimum floor price for voice and data services.