Telecom sector revenues hit 20% after RJio entry

The revenues of telecom industry have shrunk 20% in the last three quarters after the entry of Mukesh Ambani-led Reliance Jio's (RJio) in September last year.

While the industry posted a topline of Rs 43,509 crore in the fourth quarter of fiscal 2017 as compared to Rs 54,961 crore in Q1 of the same fiscal, it requires an investment of Rs 2 lakh crore in the next three years for setting up new sites, optic fibre network and acquisition of spectrum.

These figures were a part of the presentation made by country's largest telecom player, Airtel, on Friday to the inter-ministerial group (IMG) set up to look into the financial health of the telecom sector.

According to the estimates, the sector is under cumulative debt of Rs 4.9 lakh crore. Incumbents including Airtel, Vodafone and Idea have been facing pressure on their margins since the entry of RJio, which started offering free voice calls and data.

During FY2012-17, Airtel has invested Rs 125,000 crore towards total capex and spectrum cost. Out of this, Rs 46,000 crore was raised as debt and Rs 79,000 crore as equity infused from operating cash flow. Only Rs 4,000 crore dividend was paid out of cash generated from the business while rest was infused back as equity, as per the presentation.

This came few days after RJio alleged in an IMG meeting that existing players must invest equity of up to Rs 1,25,000 crore in their business rather than asking government for a bailout package. RJio had also alleged that debt to fresh equity infusion ratio was 32.8x for Airtel, 8.6x for Idea and 9.3x for Reliance Communications, according to people close to the development.

Idea Cellular and Vodafone also made their submissions before the IMG on Friday.

Idea said it supports lower data prices but the government policy framework should allow operators to recover their network costs. Vodafone said that call connect charge, currently at 14 paise, is already below cost.

All operators favoured lowering of spectrum usage charges and the universal service obligation USO levy, and the subsequent phasing out of the same. The industry is of the view that various levies like licence fee, spectrum usage charges and USO should be subsumed by GST.

IMG has already met senior executives from Reliance Jio, Reliance Communications, Tata Teleservices and Aircel apart from state-run telecom operators BSNL and MTNL.

Sectoral watchdog Telecom Regulatory Authority of India had also met all the operators on Thursday to discuss the industry's financial health.

...& ANALYSIS

• The industry posted a topline of Rs 43,509 crore in Q4 of fiscal 2017 as compared to Rs 54,961 crore in Q1 of the same fiscal
   
• During fiscal 2012 to-2017, Airtel invested Rs 125,000 crore towards total capex and spectrum cost