Panel on telecom sector health to meet again next week

Xavier Trudeau
Août 12, 2017

A section of the panel looking into the telecom sector's health feels large scale policy intervention may not be needed given green-shoots of financial recovery seen in the April-June quarter, a senior government official said, drawing protests from the industry.

However, another report by Jefferies says that the growth of Reliance Jio subscriber base and its free offering till the end of fourth quarter of 2016-17, has led to an 11.7 percent year-on-year decline (8.5 percent quarter-on-quarter decline) in industry revenues. The share of the sector in NPAs has soared despite a decrease in actual value to Rs 2,335 crore in 2016-17 from Rs 3,465 crore in 2015-16. Despite high spectrum charges, these companies were forced to reduce the tariff leading to fall in the profits.

With the introduction Reliance Jio, the competition extended from cheaper calls to cheaper data.

The survey said the telecommunications sector has experienced its own version of the "renewables shock" in the form of a new entrant that has dramatically reduced prices for, and increased access to, data, thereby benefitting-at least in the short run-consumers.

For this reason, Credit Suisse estimates that the share of telecom debt owed by companies with an interest coverage (IC) of less than 1 has more than doubled since late 2016, climbing above 55 per cent, with an associated vulnerable debt of Rs 1.5 lakh crore.

As per the survey, the mobile industry in India, now contributes 6.5 per cent ($140 billion) to country's GDP, and employing over four million people (direct and indirect).

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