Lok Sabha Question No. 1455 (UNSTARRED), answered on 2018-12-19
Subject: Loss in Telecom Sector
Ministry: COMMUNICATIONS
Asked by: K. ASHOK KUMAR

## GOVERNMENT OF INDIA MINISTRY OF COMMUNICATIONS DEPARTMENT OF TELECOMMUNICATIONS

## LOK  SABHA UNSTARRED QUESTION NO.1455 TO BE ANSWERED ON 19 th   DECEMBER, 2018

## LOSS IN TELECOM SECTOR

## 1455. SHRI K. ASHOK KUMAR

Will the Minister of COMMUNICATIONS be pleased to state:

(a) whether it is true that the telecom sector is likely to experience three more quarters of losses, hurt by high levies and unsustainable tariffs; and

(b) whether it is also true that 2018-19 will certainly be a tough year in terms of financial performance  of  the  industry,  stating  that  the  high  incidence  of  levels  like  license  fee  and spectrum usage charges, compounded by upfront payment for radiowaves have added to the operators woes and if so, the details thereof and the reaction of the Government thereto?

## ANSWER

## THE MINISTER OF STATE (IC) OF THE MINISTRY OF COMMUNICATIONS & MINISTER OF STATE IN THE MINISTRY OF RAILWAYS (SHRI MANOJ SINHA)

(a) & (b) As per IMG Report on Stressed Assets dated 31.08.2017, the Telecom sector has been witness to a fast pace of technology innovation and new entrants have ushered in competition and new paradigms. The increased competition in the sector and the entry of a new operator led to free promotional offers leading to a downward trend of tariffs and consequent decline in revenues. IMG was informed that a shakeout is happening with weaker players looking to sell, merge or even shut down. After witnessing rapid growth and expansion, the telecom sector in India is now in the midst of consolidation.  The competitive context of the industry has led to

-  Accumulation of debt
-  Decline in EBIDTA
-  Requirement of periodic infusion of additional equity.

The IMG noted that the financial stress for some has been caused because of

-  Low operating cash flows over a number of years
-  Inadequate equity infusion and
-  Debt which does not appear sustainable.

There are pockets of financial stress in the sector. However each TSP has varying levels of  debt  exposure,  different  capital  structure,  varying  cash  flows  and  hence  varying  levels  of repayment  capacity.  Hence,  as  per  IMG  Report,  the  entire  sector  cannot  be  said  to  be  in financial stress.

In  view  of  this,  the  primary  solutions  to  the  current  problems  in  the  sector  will  come internally from the TSPs and they remain liable to service the debt taken by them. Any proposed government  intervention  needs  to  be  carefully  calibrated  to  ensure  that  the  short  term  pain points  are  somewhat  eased  giving  the  sector  time  to  rework  its  investment  and  business strategy.

Further, TSPs have ushered in bundled voice and data integrated plans and price cuts have  ranged  between  67%-45%  for  data  recharge.  This  has  also  resulted  in  an  exponential growth in data traffic. 4G rollout has quickened pace and internet penetration is likely to pick up speed. Presently, this has not translated into revenue accruals to TSPs or Government.

The following table shows the quarterly Gross Revenue of Major TSPs for the FY 2016-17 and 2017-18:

|                              | 2016-17   | 2016-17   | 2016-17   | 2016-17   | 2017-18   | 2017-18   | 2017-18   | 2017-18   |
|------------------------------|-----------|-----------|-----------|-----------|-----------|-----------|-----------|-----------|
|                              | Q1        | Q2        | Q3        | Q4        | Q1        | Q2        | Q3        | Q4        |
| Gross Revenue (In Rs Crores) | 62627.51  | 59785.82  | 55303.43  | 52126.49  | 53906.43  | 57260.27  | 52408.04  | 53209.44  |

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