Telcos May Not Get a Major Policy Boost
Govt panel may just push for extending deferred payments, lowering interest rate
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.