Low operating cash flows, inadequate equity infusion and unsustainable debt have led to a financial stress in the telecom sector.
In a written reply to a question in Lok Sabha, the ministry of communications said the Inter-Ministerial Group (IMG) under the department of telecommunications (DoT) observed there are pockets of financial stress in the sector.
However, the entire sector cannot be said to be in financial stress.
IMG noted that the financial stress for some has been because of low operating cash flows over a number of years, inadequate equity infusion and debt, which does not appear sustainable, Manoj Sinha, minister of state for communications, said.
The sector is in the midst of consolidation and the competitive context of the industry has led to the accumulation of debt, a decline in Ebidta (earnings before interest, taxes, depreciation, and amortisation) and requirement of periodic infusion of additional equity.
In view of this, the primary solutions to the current problems in the sector will come internally from the telecommunications service priority (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," he said.
In a separate reply, DoT has suggested the Finance Ministry that GST for telecom services be lowered to 12% against the existing 18%.
The recommendation was made during the process of the Budget exercise, and the matter is with the Department of Revenue under Ministry of Finance for necessary action, Sinha said in a written reply to Lok Sabha.
Telecom Regulatory Authority of India (Trai) had favoured reduction of licence fee and universal service obligation levy, cut in spectrum usage charges and relaxation in spectrum pay-out terms, in view of the debt burden on telecom companies. A favourable consideration of the matter would help reduce financial stress of telecom players and enable them to offer affordable and quality services to consumers. "The issues are under examination," Sinha said.
IMG has recommended giving a one-time opportunity to telcos to opt for more number of installments (16 instead of the current 10) for payment of spectrum, and the matter needs further approval by the Cabinet, he added.
It has also proposed an amendment to spectrum trading guidelines, saying that the telecom department should issue a clarification that only gain or profit from spectrum trade will form part of revenue for the purpose of calculation of adjusted gross revenue (AGR). Other recommendations include easing the interest rate on delayed payment of license fee and spectrum usage charges and harmonisation of spectrum in 2300 MHz and other bands on a priority.It has also suggested that approach to fixing the reserve price for spectrum should be reviewed in sync with global best practices.
"Action for obtaining necessary approvals is underway, including consultations with Trai and other government departments," Sinha said.
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