JIO SAYS INCUMBENTS TO BE BLAMED FOR TELECOM DEBT WOES
Reliance Jio is learnt to have told the government that telcos must invest more to stay ahead rather than just go after sops. Incumbents such as Bharti Airtel, Vodafone and Idea had earlier alleged that ‘’predatory pricing’’ by Jio had hit their profit margins. The Mukesh Ambani-owned firm, at a meeting with an inter-ministerial group, said on Monday that though there should be reduction in levies, operators should also commit to making equity infusion and investment in new technologies as a priority, sources said.
Reliance Jio, the latest telecom entrant to step up competition in the sector which is already facing steep debt and profit erosion, is learnt to have told the government that telcos must invest more to stay ahead rather than just go after sops. Incumbents such as Bharti Airtel, Vodafone and Idea had earlier alleged that “predatory pricing’’ by Jio had hit their profit margins.
The Mukesh Ambaniowned firm, at a meeting with an inter-ministerial group (IMG), said on Monday that though there should be reduction in levies, operators should also commit to make equity infusion and investment in new technologies as a priority, sources said. An IMG was formed to look into the telecom sector woes. Besides Reliance Jio, executives from Tata Teleservices, Aircel and Anil Ambani-owned Reliance Communications attended the first IMG meeting on Monday. In the coming days, other telcos will meet the IMG. Even regulator Trai and telecom minister Manoj Sinha have called promoters and heads of businesses for discussions later this month.
"Incumbent operators that have tried to block the entry of new operators and prevented launch of new technologies are now passing the blame and seeking relief," a presentation made by Jio said.
While pointing out that telecom continues to remain one of the highly profitable sectors with Ebitda margin of 30 per cent, Jio told the panel of officials that the financial stress had been caused by the old operators themselves as they did not invest in equity or in new technology but kept on piling debt.
Also Jio blamed the top three operators — Airtel, Vodafone and Idea — of cartelisation which led to the financial stress of smaller operators. These three are now seeking relief from the government by leveraging problems of smaller operators, Jio is believed to have said. Even though Jio was against deferred payment for spectrum, RCom sought repayment period of the existing liabilities to be spread over a longer tenure. RCom, Tata Teleservices and Aircel also told the panel that licence fees and spectrum usage charges must be reduced to uniform rate of 1 per cent, according to sources.
So far, the incumbents or old telcos have blamed the free services offered by Jio to be the reason for their current woes and have sought government help to tide over the crisis.
Jio told the panel that the deferred payment for spectrum has done more harm to the sector as it made the airwaves too expensive. While incumbent operators paid an astronomical amount for spectrum, they have used airwaves with legacy technologies which is not a prudent business decision, Jio argued. As per Jio’s presentation, 70-80 per cent of total debt as deferred payment highlights that operators have not invested in new technology.
Their (old telcos) excessive dependence on debt has led to "unsustainable balance sheets’’, the presentation said.
Jio listed out that since 2010, Airtel has raised ~2,28,831 crore debt while infusing just ~6,978 crore as fresh equity in business whereas Idea raised ~32,986 crore debt as compared to ~3,846 crore infusion as fresh equity. Reliance Communications drew ~56,319 crore debt on fresh equity infusion of ~6,071 crore.
So far, the incumbents have blamed the free services offered by Jio to be the reason for their current woes