Tel­cos May Not Get a Ma­jor Pol­icy Boost

Govt panel may just push for ex­tend­ing de­ferred pay­ments, low­er­ing in­ter­est rate

The Economic Times - - Companies: Pursuit Of Profit - Our Bu­reau

New Delhi: Some mem­bers of a fed­eral panel look­ing into the In­dian tele­com sec­tor's health be­lieve that the green shoots vis­i­ble in the June quar­ter have ob­vi­ated the need for large-scale pol­icy in­ter­ven­tions. The in­dus­try, how­ever, ap­pears to have a very dif­fer­ent view.

An of­fi­cial aware of the dis­cus­sions in the in­ter-min­is­te­rial group (IMG) said that mea­sures such as ex­tend­ing the pe­riod for mak­ing de­ferred pay­ments to 16 years and low­er­ing the rates of in­ter­est may suf­fice. “Green shoots are vis­i­ble in the sec­tor in Q1... There’s a chance that no ma­jor pol­icy in­ter­ven­tion may be re­quired,” the of­fi­cial said, adding that there’s no con­sen­sus in the com­mit­tee as yet.

Car­ri­ers, how­ever, urged the gov­ern­ment to in­ter­vene in time to pro­tect the in­dus­try from im­plod­ing from a ris­ing debt bur­den, presently at ₹ 5 lakh crore. Other pain points for the in­dus­try in­clude stretched bal­ance sheets, erod­ing prof­itabil­ity and even ris­ing non-per­form­ing as­sets.

The gov­ern­ment panel is likely to meet again next week — likely Au­gust16 or17 — to take a fi­nal de­ci­sion on the mea­sures the sec­tor has been seek­ing for months, an­other per­son fa­mil­iar with the mat­ter said. The rec­om­men­da­tion of the group will be placed be­fore the tele­com com­mis­sion and ul­ti­mately to the Cab­i­net. The IMG’s ref­er­ence to green shoots re­fer to the fis­cal first quar­ter re­sults of lead­ing car­ri­ers, where rev­enue had ei­ther re­mained at the level of the ear­lier quar­ter or in­creased se­quen­tially, while data us­age conti- nued to surge amid se­vere pric­ing pres­sure.

Bharti Air­tel’s rev­enue for the quar­ter ended June rose to ₹ 17,244 crore from ₹ 17,036 crore for the three months ended March, while that for Idea Cel­lu­lar also rose marginally to ₹ 8,166 crore from ₹ 8,126 crore. Voda­fone In­dia rev­enue was al­most flat in the same pe­riod. Rev­enue in the Jan­uary-March quar­ter for all three had fallen sharply, when com­pared with the Oc­to­ber-De­cem­ber pe­riod.

But tel­cos dis­agreed with the view around re­vival, point­ing to the high debt lev­els and pres­sure on earn­ings and on­go­ing com- pe­ti­tion that may make it dif­fi­cult to ser­vice the debt, lead­ing to de­faults. “You see green shoots only if you’re wear­ing green col­ored glasses. What the banks, in­vestors, equip­ment man­u­fac­tur­ers, em­ploy­ees and the in­dus­try are see­ing is scorched earth,” cau­tioned Ra­jan Mathews, di­rec­tor gen­eral of Cel­lu­lar Op­er­a­tors As­so­ci­a­tion of In­dia (COAI), which rep­re­sents lead­ing in­cum­bent car­ri­ers in­clud­ing Bharti Air­tel, Voda­fone In­dia and Idea Cel­lu­lar.

“We can­not af­ford to kick the can down the road any longer. Fail­ure to ad­dress the is­sue now will only lead to the mal­ady spread­ing fur­ther,” he added. Re­liance Com­mu­ni­ca­tions has al­ready de­faulted on some of its debt ser­vic­ing obli­ga­tions and is cur­rently un­der­tak­ing a strate­gic debt re­struc­tur­ing pro­gramme.

ET had re­ported ear­lier that while the IMG has been con­sid­er­ing some re­lief, it was not go­ing to of­fer a com­pre­hen­sive bailout pack­age.

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