An inter-ministerial panel has been set up to get the telecom sector on track. The panel, comprising senior officials from the ministries of finance and telecom, will explore the "systemic issues affecting viability and repayment capacity in the telecom sector and furnish recommendations for resolution of stressed assets at the earliest".
The panel will also recommend policy reforms and strategic interventions for the telecom sector which has a staggering debt of Rs 4.6 lakh crore. Last month, the RBI advised banks to closely monitor the telecom sector, and review their exposure to it.
The inter-ministerial group has been constituted at a time when the telecom sector, despite a growing subscriber base, is under extreme financial pressure, intensified by the entry of disruptive Reliance Jio.
In September 2016, Mukesh Ambani's venture Jio stormed into the Indian telecom market with free voice and data services, forcing established operators to slash rates to protect their turf. This put revenue and profitability of all telcos under stress, although subscribers benefited from cheap data and voice packs.
Even after launching its paid services post-March 2017, Jio continues to be aggressive, offering data at rock-bottom prices while voice calls are free.
The latest earnings season has further deepened the worry lines - India's largest telecom operator Bharti Airtel recently reported its lowest quarterly profit in four years as net earnings fell 72 per cent in January-March.
Smaller rival Idea Cellular posted a loss of Rs 325.6 crore in the three-month period ended on March 31, 2017.
How much has Jio impacted the financial performance of India’s top telcos?
Bharti Airtel Ltd, Vodafone India Ltd and Idea Cellular Ltd have dipped by 10 per cent and operating profits by 23 per cent on a cumulative basis. This is based on a sequential comparison of the second half of financial year 2016-17 with the first half, when Jio’s impact was negligible.
Aggressive cost-cutting and customer retention plans helped the incumbents control the damage, especially in the March quarter and the results during this period demonstrates this. The performance was far better compared to the performance in the December quarter.
Whereas, in the December quarter, the first full quarter of Reliance Jio’s free services, operating margins of Airtel and Idea fell by 475 basis points on a cumulative basis, in the March quarter, they declined by just 10 basis points. Vodafone doesn’t report quarterly results for its India operations, but releases a half-yearly statement.
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