Survey shows JIO led to fall in profitability on other telcos

Rodiano Bonacci
Agosto 12, 2017

"Stiff competition, price war, reduced revenue have trapped telecom sector into highly leveraged with interest coverage ratio turning less than 1 since third quarter of 2016-17", the survey said.

Meanwhile, IMG is also considering certain measures, including increasing period of deferred spectrum payments to 16 years, a proposal that could bring some relief to the industry.

"Green shoots are visible in 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 commitee.

However, the source said that a final decision on the matter has not been taken and further discussions will be required.

Once the recommendations are prepared, it will be placed before the Telecom Commission and ultimately to the Cabinet, for approval.

As of now, the proposals that are being considered by the IMG include giving telecom companies more time to pay for the spectrum they bought, and if approved such relaxations would improve the cash flow of telecom companies.

Currently, a portion of spectrum auction amount is taken as upfront payment by Department of Telecom (DoT) and the balance after a two-year moratorium is paid out every year in 10 instalments.

The other proposals being discussed include convergence between DoT guidelines and RBI guidelines on the issue of allowing spectrum as a collateral.

The entry of Reliance Jio on September 5 past year has forced incumbent telecom firms to cut voice and data tariffs and the stiff competition, price war and reduced revenue has trapped telecom into a highly leveraged sector, part two of the Economic Survey for 2016-17 said. An inter-ministerial panel to examine the financial woes of the telecom sector held several meetings in June with stakeholders, including telecom operators and banks. The industry has a debt of Rs 4.6 lakh crore, and has been seeking sops to overcome the crisis.

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