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‘Telecom’s share in NPAs up, Jio triggered tariff cut’
The Economic Survey has expressed ‘worry’ over the increase in share of telecom sector in non- performing assets at a time when operators have seen a fall in revenue due to stiff competition after the entry of Reliance Jio.
The survey said Jio’s pricing scheme “forced incumbent telecom firms” to cut voice call rates and cost of 1 GB data to average $1.9 during January-March 2017.
“Stiff competition, price war, reduced revenue have trapped telecom sector into highly leveraged with interest coverage ratio turning less than 1 since third quarter of 2016-17,” the survey said.
However, what’s worrying is that the share of the telecom sector in the non-performing assets (NPAs) has now increased, it said.
The share of the sector in NPAs has increased despite decline in actual value to Rs 2,335 crore in 2016-17 from Rs 3,465 crore in 2015-16. In terms of percentage, the share increased to 8.7 per cent in 2016-17 from 5 per cent in the previous year.
The adjusted gross revenue (earnings from sale of telecom services) of the top three telecom companies in India - Bharti Airtel, Vodafone India and Idea Cellular declined by 7.98 per cent, 5.14 per cent and 4.91 per cent respectively during third quarter of 2016-17 compared to the previous quarter.
It noted that earnings of telecom operators before interest and taxes by sales ratio also declined and at the same time industry faced high spectrum charges.
As per the survey, the mobile industry in India accounts for 6.5 per cent ($140 billion) of the country’s GDP, and employs over 4 million people direct and indirectly.
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