NPAs of telecom sector rises: Economic Survey

Many challenges Services sector growth shows moderation

The entry of Reliance Jio on September 5 previous year has forced incumbent telecom firms to cut voice and data tariffs and the stiff competition, price war and reduced revenue has trapped telecom into a highly leveraged sector, part two of the Economic Survey for 2016-17 said. The gross revenue of Bharti Airtel, Vodafone India and Idea Cellular has seen a decline of 7.98%, 5.14% and 4.91% during the third quarter in 2016-17.

"For the first time in over 20 years, the telecom sector registered de-growth in revenues, leading to a reduction in the government's share in revenues, sharp drop in operating margins, accompanied by increased interest costs arising from a staggering industry debt burden, and higher depreciation and amortisation charges as a result of higher spectrum purchase costs", the statement said. The share of the sector in NPAs has soared despite a decrease in actual value to Rs 2,335 crore in 2016-17 from Rs 3,465 crore in 2015-16.

Jio's pricing scheme has forced the other telecom companies to cut their voice and data rates to an average of less than 2 dollars but the worrying fact is that the share of the telecom sector in the non-performing assets (NPAs) has now increased, it said.

Telcos hope the IMG provides some relief to the industry reeling under large debt of Rs 5 lakh crore, which banks peg at Rs 7.29 lakh crore, facing stretched balance sheets and hit to profitability amid brutal price competition from Reliance Jio that began offering free voice and data since last September.

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The sector has debt of almost Rs 5 lakh crore and the banking sector - which pegs debt at Rs 7.29 lakh crore - is anxious that competition will lead to defaults.

Telecom minister Manoj Sinha has previously said that the government will not shy away from taking "bold steps" to save the sector which has been the poster child of connecting India.

As per the survey, the mobile industry in India accounts for 6.5 per cent ($ 140 billion) of GDP, and employs over 4 million people direct and indirectly. "The telecom sector has experienced its own version of the "renewables shock" in the form of a new entrant that has dramatically reduced prices for, and increased access to, data, thereby benefitting-at least in the short run- consumers".

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