The inter-ministerial group (IMG) formed to look into the woes of telecom sector has become the stage for leveling charges and counter-charges between top three incumbent mobile players — Bharti Airtel, Vodafone India and Idea Cellular — and the new entrant Reliance Jio. The series of meetings between IMG and telecom players, which started yesterday and will continue this week, might see rift widening between operators. What benefits will come out it, only time will tell…
NEW DELHI, JUNE 13, 2017: On the first day of IMG meeting on Monday, Reliance Jio Infocomm told the high-level panel that incumbent players were to be blamed for the current crisis as they failed to invest in new technologies and that they stretched their balancesheets through extensive borrowings without bringing in any equity money. It also accused the top three incumbents — Bharti Airtel, Vodafone India and Idea Cellular — of having formed a cartel to milk the industry and hurting interests of subscribers.
In its detailed presentation before the IMG, which includes top officials from Telecom and Finance Ministries, Reliance Jio officials said all promoters infuse equity worth Rs.1.25 lakh crore to reduce debt and improve their debt servicing ratio, and said that their was no need for banks to carry all the financial burden alone.
Reliance Jio reportedly blamed incumbent players for not diluting their shareholding to raise funds for investment in new technologies, and solely depending on banks for funds. Reliance Jio said it was unnecessarily being blamed for reducing revenues and profit margins of incumbent players and the “financial stress” in the sector, but the fact was that aggressive financing strategies and over-leveraged balance sheets of the operators were behind the incumbent operators’ financial mismanagement. All this when the telecom sector has been recording the highest Ebitda margins, which is close to 30%, compared to other sectors.
It also said while various experts have been projecting India’s mobile broadband market to grow rapidly and reach Rs.3.5-4.5 lakh crore in the next three years, it is reluctance on part of operators to invest in new technologies that might hurt the growth.
The Reliance Industries Ltd group company also blamed the top three incumbent players of forming a cartel which resulted in stifling the growth of telecom sector and marginalised other players, besides disadvantaging mobile users. It also blamed industry body, Cellular Operators Association of India (COAI) for serving the “vested interests” of the “three dominant operators”.
Reliance Jio also suggested reduction in government levies such as GST and License Fee to make the sector more competitive. If the government brings down the License Fee to 1% from current 8% and GST to 12% from the proposed 18%, it will help the sector save around Rs.20,000 crore.
Now, the top three incumbent players are likely to present their case before the IMG on June 16, where they are likely to present point-by-point rebuttal to Reliance Jio’s charges besides seeking government’s intervention in addressing the current financial stress that the sector is facing.
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