Sector under stress, cut revenue target: Telecom panel to govt
DEBT LADEN DoT’s nontax revenue target may be revised to ₹29,524 cr from a projected ₹47,304 cr to help cut losses
India’s Telecom Commission (TC) has written to the finance ministry requesting it to slash the telecom department’s non-tax revenue target for the current fiscal by as much as 38%, citing “severe financial stress” faced by the industry.
The telecom sector is under severe stress because of “rapidly declining revenues” of all major telecom operators, the commission said in a June 1 letter, which has been reviewed by Mint.
In the letter, TC’s member finance Anuradha Mitra said that the non-tax revenue target for the Department of Telecommunications (DoT) may be revised to ₹29,524.15 crore from a projected ₹47,304.71 crore.
It said that licence fee collections will fall from a projected ₹16,664 crore to ₹9,255 crore in 2017-18. It expects spectrum usage charge (SUC) collection to be significantly lower at ₹4,970 crore. It also expects spectrum auction proceeds for the current financial year to be nil even as DoT has sought the telecom regulator’s views on the next round of spectrum auctions. Therefore, the estimated collection on account of spectrum charges, deferred payments and spectrum auction would be ₹17,056.64 crore as against the earlier projection of ₹26,445.03 crore. The commission also estimates total liabilities of telcos at ₹7.29 lakh crore .
Further, it said that one of the main factors leading to a fall in revenues is the free promotional offers and continuation of tariffs of promotional nature.
“TSPs have introduced bun- dled voice and data integrated plans. Market analysts have estimated that the price cuts have ranged between 45% and 67% for data recharge,” Mitra of TC said in the letter, adding that the sector would require an investment of ₹2.5 lakh crore by 2020 and the capacity of telcos to fund capex is also constrained in view of their stretched balance sheets.
“The sector is highly leveraged and as per assessment of the banking sector, total outstanding liabilities on the TSPs could be as much as ₹7.29 lakh crore.”
On April 4, the Reserve Bank of India issued an advisory to the banks to review loans to telcos and consider making provisions for standard assets in the sector at higher rates so that necessary resilience is built into the balance sheets of the lenders should the stress reflect on the quality of exposure to the telecom sector at a future date. Banks have also been advised to monitor their exposure to the sector closely.
“The RBI advisory and stress in the sector place a question mark on the ability of TSPs to fund spectrum purchases. In the circumstances, spectrum auction proceeds for 2017-18 are being taken as Nil,” Mitra said.
The government has taken note of the state of the affairs in the sector. An inter-ministerial panel led by a senior official in the telecom ministry on June 12 started its hearings on a possible bailout of debt-laden companies.
“There is unprecedented pressure on revenues on the sector and that has largely been created by free services and offers,” said Rajan Mathews, director-general, Cellular Operators Association of India.