Heavily debt-ridden telecom sector looks for financial support from Centre

  • With the focus on ‘AtmaNirbhar Bharat’, revenue from the telecom equipment sector is expected to grow to USD 26.38 billion by 2020.
  • The number of internet subscribers in the country is expected to double by 2021 to 829 million and overall IP traffic is expected to grow four-fold at a CAGR of 30 percent by 2021.

The Indian telecom sector, which is already in a state of financial turmoil and bad loans is now looking for government support in key areas such as spectrum pricing, AGR, liquidity, and rationalization of levies, claims Cellular Operators Association of India (COAI). 

The sector has contributed immensely during the periods of lockdown and has offered 35 percent of GDP during that time. But, operators are still struggling to repay the rest of the amount to the government and Reserve Bank of India (RBI). Back in February this year, the debt-ridden operators paid a partial amount out of Rs 1.47 lakh crore. Tata Group and Vodafone have already paid their loans, while Airtel paid Rs 10,000 crore. The amount was paid after the apex court warned the telecom bigwigs of contempt and defaulter.

Vodafone Idea and Tata Group have made part payment of about Rs 2,500 crore and over Rs 2,197 crore. According to the telecom department, Airtel owes a total of 35,586 crores. After paying 10,000 crores, it still has to pay around 25,586 crores. Vodafone owed a total of 53,000 crores. After the payment, It still has to pay around 50,500 crores. Tata Teleservices has to make a total payment of 13,800 crores.

Source: TOI

But, the industry body COAI stated that the major impediments which the operators are now facing include repaying their loan amount, Right of Way Rules (Row), spectrum pricing, AGR, liquidity, rationalization of levies, and finally cell tower radiation.

The graph of the telecom sector started flattening when the 2G scam was exposed and since then the operators borrowed millions from the government. When Reliance Jio entered India in 2016 with its free 4G and additional services the rivals started facing challenges. Hence, they followed the same path of free services and unlimited services at a very cheap price, which ultimately led to its downfall.

Speaking about the industry’s fiscal challenges, S P Kochhar, Director General of COAI said “However, the industry continues to be financially stressed and we seek the support of the government in enabling the industry to truly play its role as an enabler of horizontal growth and a boost to the nation’s economy.”

Now, the point to be noted is that the 5G spectrum auction is about to commence by March 2021 then how come operators will go for bidding rather than Reliance Jio. Airtel has already ignored to move to the auction as it feels the price per spectrum is very high, and telecom experts also feel that the price is almost double that of Europe and the United States. The Indian government has given a moratorium period of 16 months to the telecom companies, but how will they repay when they already owe Rs 1.47 lakh crore to the government? 

According to COAI, in the Q1 data and voice services spending has escalated 16.6 percent YoY that amounts to Rs 35,642 crore (USD 4.80 billion). Back in September, the apex court allowed the telecom firms to repay their AGR dues of Rs 1.43 lakh Core to the government in a period of ten years. 

COAI further added, “With the focus on AtmaNirbhar Bharat, revenue from the telecom equipment sector is expected to grow to USD 26.38 billion by 2020. The number of internet subscribers in the country is expected to double by 2021 to 829 million and overall IP traffic is expected to grow four-fold at a CAGR of 30 percent by 2021.”

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