Representatives of wireless carriers and banks met an inter-ministerial group comprising officials from finance and telecom ministries over the week to discuss the sector’s problems. Older operators have been challenged by an aggressive new rival in Reliance Jio Infocomm Ltd. and the central bank has raised concerns that loans to the sector were at a risk of turning bad.
Here are the issues raised during the meetings, based on what officials from banks, companies and the government said...
Reliance Jio: Rivals To Blame For Financial Stress
- Rival telecom operators only had themselves to blame for financial stress.
- Rivals’ debt has gone up because they didn’t invest in new technology.
- Opposed any relaxation on spectrum payments.
- Contribution to the Universal Service Obligation Fund (USoF) should be relaxed.
- Any measures should be implemented prospectively, not retrospectively.
(Source: Company officials present in the meeting to BloombergQuint)
Bharti Airtel: 5-Year Moratorium On Spectrum Payments
- Reliance Jio has misrepresented reality.
- Industry revenue has declined by 20 percent in three quarters.
- Fixed termination charges should be on a full-cost basis.
- Increase moratorium on spectrum payments from two to five years.
- Allow installments for 15 years instead of 10.
- Need for a single licence for carriers operating pan-India.
(Source: Company officials present in the meeting to BloombergQuint)
Vodafone: No Cut In Termination Charge
- Mobile termination charge at 14 paise is way below costs; any more cuts will impact rural services.
- Spectrum usage charges are among the highest in the world; need to consider whether these are required.
- Contribution to USoF should be brought down from 5 percent of the adjusted gross revenue to 3 percent.
- Licence fees should be subsumed into into Goods and Services Tax. If not that, then GST should be brought to 5 percent from 18 percent like other core sectors.
(Source: Vodafone official present in the meeting to BloombergQuint)
Idea Cellular: Floor Price For Tariffs
- The government must ensure a stable tariff regime; suggested a floor price.
- Interconnection usage charges, which carriers pay for cross-network calls, should be high enough for operators to recover costs.
- Telecom a highly taxed industry.
- Data prices should come down.
(Source: People present in the meeting to BloombergQuint)
MTNL: Capital Infusion
- Facing legacy issues.
- Employee costs at Rs 2,800 crore are 90 percent of the income.
- Competition requires capital; looking for an infusion of Rs 8,000-10,000 crore over a period of time.
(Source: MTNL’s chairman and managing director while interacting with the media)
Lenders: Risk Of Defaults
- High levels of stressed assets in the telecom sector; flagged the possibility of default by operators.
- Declining revenues adding to stress.
- Debt resolution measures, capital infusion needed to boost liquidity.
- Inter-ministerial group may call another meeting with banks.
(Source: Officials present in the meeting to BloombergQuint)
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