Government receives SOS from telecom players as debt mounts
The telecom sector, which is highly leveraged on account of the aggressive bids in the past for acquiring spectrum and of the huge capital spending required for infrastructure, wants the government to extend the deferred spectrum payment period to 20 years from 10 years at presentbusiness Updated: Jun 13, 2017 12:19 IST
With mounting debt and deferred spectrum payment obligations crippling the telecom industry amid intense competition which is driving down their margins, an inter-ministerial panel led by a senior telecom ministry official on Monday started hearing demands from players for major cuts in various statutory payments and a liberal payment schedule.
The sector, which is highly leveraged on account of the aggressive bids in the past for acquiring spectrum and of the huge capital spending required for infrastructure, wants the government to extend the deferred spectrum payment period to 20 years from 10 years at present and reduce the spectrum user charge the interconnect charges, said an industry executive who asked not to be named. Companies pay spectrum user charges in addition to the amount paid for acquiring the natural resource.
A government official, who also spoke on condition of anonymity, said earlier in the day that the issue of distress in the telecom sector was discussed at a meeting of chiefs of state-owned banks chaired by finance minister Arun Jaitley, but no decision has been taken yet. “We are waiting for the telecom ministry to come back with proposals after consultations with the industry,” said the official. According to industry estimates, telecom sector owes about Rs 4 trillion to banks.
The inter ministerial meeting which heard representatives of Reliance Jio Infocomm Ltd. and Tata Teleservices Ltd on Monday is expected to meet representatives of banks on Wednesday and more industry executives subsequently before the telecom minister Manoj Sinha meets chief executives of companies on 25, June, said the executive quoted above.
An email sent to Cellular Operators Association of India (COAI) remained unanswered at the time of going to press. Phone calls made to Rajan Mathews, director general of Cellular Operators Association of India (COAI),were not immediately answered.
The industry representative quoted above explained that in 2017-18 alone, the interest payment liability of the sector would come to Rs 53,000 crores, while deferred payment obligation to government for spectrum acquisition in the past will come to Rs 28,000 crore, while the industry’s earnings before interest, tax, depreciation and amortisation (EBITDA) will come to only about Rs 50,000 crores, which is not sufficient to meet the payment liabilities.
Interestingly, Monday’s meeting held by the panel saw differences among different players competing for the market share, coming out in the open. A person privy to the discussions in the meating said on condition of anonymity that Reliance Jio Infocomm Ltd ascribed the financial stress in the telecom sector to other operators running businesses on debt and not investing sufficiently in new technology that will reduce operational cost. Other operators blame Jio’s promotional free voice and data offering for the financial woes of the sector.
An email sent to Reliance Jio Infocomm, a subsidiary of Reliance Industries Ltd., remained unanswered at the time of going to press.
Telecom companies paid Rs 78,000 crore to the telecom department in 2016-17 alone by way of recurring licence fees and other fees, as per union budget of 2017-18. Another industry executive, who also spoke on condition of anonymity that if the sector is not salvaged, government’s revenue receipts from the sector too will get affected.