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Telecom revenue mop-up slips 22 in FY18 as earnings take a hit
Economic Times, January 05, 2019

KOLKATA: The government’s revenue mop-up from the telecom industry fell by nearly 22% in FY18 due to a decline in service providers earnings from sale of services, amid a brutal tariff war, telecom minister Manoj Sinha told Rajya Sabha on Friday.

Sinha said the industry’s adjusted gross revenue (AGR) fell 18.62% to Rs 1,30,844.9 crore in FY18 from Rs 1,60,787.9 crore in the previous fiscal, resulting in lower licence fees and spectrum usage charges (SUC), reflecting continuing financial stress.

AGR is the revenue that telcos derive from access services. They pay 8% of AGR as licence fee and roughly 5% as SUC — the two key revenue streams for the government. Revenue from licence fee declined 18.12 % to Rs 10,670.6 crore in FY18, from Rs 13,032.9 crore in FY17. “SUC receipts have also declined due to declining AGR,” Sinha said in a written reply to a query in the House.

SUC dipped over 29% to Rs 4,983.75 crore in FY18, from Rs 7,048 crore in the FY17, the minister said.

Sinha also cited the earlier report of an inter-ministerial group (IMG) on stressed assets in the telecom sector, which had noted, “Increased competition in the sector and entry of a new operator (read: Reliance Jio) led to free promotional offers, triggering a downward trend of tariffs and consequent decline in revenues.”

Jio’s disruptive entry in September 2016 and its relentless pricing aggression had forced older incumbent carriers to match rates to hold on to customers, in turn, eroding their revenue and profits.

That led to big-ticket consolidation, culminating in the mega Vodafone-Idea merger last August, as well as exits of several fringe players who could not withstand the brutal price wars.

In this context, Sinha said “the IMG had noted financial stress for some operators had been caused by low operating cash flows over a number of years, inadequate equity infusion and debt that does not appear sustainable.”

However, the minister said the IMG report also noted the entire sector was not in financial stress, and accordingly, the primary solutions to current problems would have to come internally from the telcos as they remained liable to service debt taken by them.

Sinha’s comments in Parliament come less than two months after the embattled Vodafone Idea (VIL) under intense financial pressure, having posted a whopping Rs 4,974-crore loss in the September quarter, had raised concerns about its ability to service debt that has ballooned to over Rs 1.15 lakh crore.

Vodafone Idea chairman Kumar Mangalam Birla recently met top finance ministry officials, flagging off the company’s woes and warning of a default on spectrum related payments which fall due in March 2019.

PENALTY OF Rs 58 LAKH
Separately, the telecom minister said the government has initiated steps to rein call drops by slapping a penalty of Rs 58 lakh on telcos, including erstwhile Idea CellularNSE 1.24 % (which merged with Vodafone India in August 2018) and staterun Bharat Sanchar Nigam.

“A penalty of Rs 4 lakh was imposed on BSNL in the June quarter while Rs 12 lakh was slapped on Idea during the same quarter,” the minister said.

Elaborating on financial disincentives imposed by the regulator on non-complaint providers against prescribed call drop benchmarks, Sinha said during the March quarter, a Rs 3-lakh penalty was imposed on BSNL, Rs 10.5 lakh on Idea, Rs 22.5 lakh on Tata TeleservicesNSE 0.00 % and Rs 6 lakh on erstwhile Telenor India (which was acquired by Bharti AirtelNSE 0.70 % last May).

However, the minister added that the call drops situation had improved with augmentation of telecommunications infrastructure and an increase in the base stations count to 20 lakh from 8 lakh in calender 2014.

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