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PMO taking stock of telcos' financial health

PMO held talks with DoT on falling revenues of carriers several times last month.

Oct 14, 2019, 06.32 AM IST
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A new set of officers has been handling telecom in the PMO in Modi 2.0.
NEW DELHI: The highest government echelons are assessing the health of the telecom industry, which is under financial stress, and looking at ways of restoring its viability. People familiar with the matter said the Prime Minister’s Office (PMO) has met senior officials of the Department of Telecommunications (DoT) more than half a dozen times in the past month and some concrete steps are under active consideration.

“There have been several rounds of meetings between officials of the PMO and the DoT — over half a dozen,” said a senior official. “The PMO is concerned about the falling revenue of the sector and discussions are broadly around how to revive the profitability of the industry.”

In the second term of the Bharatiya Janata Party-led government, which began earlier this year, a new set of officers has been handling telecom in the Prime Minister’s Office. Telecom industry revenue has been falling sharply since FY17, with sectoral debt exceeding Rs 7 lakh crore. Telecom minister Ravi Shankar Prasad has written to FM Nirmala Sitharaman seeking relief measures, pointing out that adjusted gross revenue (AGR) of the sector had shrunk to Rs 1.39 lakh crore in FY19 from Rs 1.85 lakh crore in FY17, reflecting its poor health.

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‘Can’t Afford One More Exit’
The minister has sought a cut in levies such as licence fees, besides offsetting the Rs 36,000 crore input tax credit on goods and services tax (GST), which is yet to be refunded to companies, against future GST levies. “Some of the telcos have individually approached the government for some intervention on tariffs.

However, this is beyond the domain of the government. Tariffs fall within the purview of the Trai (Telecom Regulatory Authority of India),” the official said, elaborating on discussions at the top-level meetings. “Secondly, we cannot come out with relief for a specific company, the government has to come out with a package for the entire sector and right now we are working on that.”

Senior Vodafone Idea and Bharti Airtel executives have met senior DoT officials, seeking some relief and pushed for a mechanism that would allow tariffs — which are at all-time lows due to a price war — to increase. Last month, Vodafone Global CEO Nick Read met senior government functionaries and sought a two-year moratorium on the payment of spectrum-related dues, given the telco’s precarious financial health with quarterly losses of nearly Rs 5,000 crore. Reliance Jio Infocomm, the only telco in the black in India, is against any kind of relief package. The official said the telcos would have to resolve tariff issues among themselves or approach the regulator. “Someone needs to smoke the peace pipe,” he said.

The price war since Jio’s entry in September 2016 has shrunk the industry into three non-state players from eight, with some exiting the country, some merging and two — Aircel and Reliance Communications — going out of business. Experts said India’s telecom sector can ill-afford a third operator exiting the market or going bankrupt as this will hurt all stakeholders, including consumers, equipment vendors and tower companies, besides leading to more job losses.

To be sure, the industry recorded a near 9% sequential jump in AGR in the June quarter, which is the sharpest on-quarter growth on this score since Jio’s entry, data collated by the telecom regulator showed, signaling that the worst is perhaps over for the financially stressed sector amid some stability in tariffs. Also, Jio recently announced that it would be charging for voice calls made to rival telcos on account of the 6 paise a minute that it pays to other telcos as interconnect usage charge (IUC). Analysts view this as relief for the industry, offering Airtel and Vodafone Idea scope to raise rates in some form, thus helping in revenue and profit recovery. IUC is the charge a telco pays when its customer dials into another a network.

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