The Economic Survey, tabled in Parliament on Friday, has raised red flag over the telecom sector’s rising share in non-performing assets (NPAs).
“…what’s worrying is that the share of the telecom sector in the non-performing assets (NPAs) has now increased,” the survey said.
Though the total telecom NPAs with the public sector banks had decreased to ₹2,335 crore in 2016-17 from ₹3,465 crore in 2015-16, the share of the NPAs in total NPAs of infrastructure sector rose 8.7% in 2016-17 from 5% in 2015-16. An inter-ministerial panel to examine the financial woes of the telecom sector held several meetings in June with stakeholders, including telecom operators and banks. Its report is expected soon.
Stating some available indicators were showing reasonably good performance in telecom with increase in the number of connections “reflecting the Jio effect,” the survey said with introduction of Reliance Jio, competition shifted from cheaper calls to cheaper data.
‘Price war’
“Stiff competition, price war, reduced revenue has trapped telecom sector into highly leveraged with interest coverage ratio turning less than 1 since Q3 of 2016-17,” it said. “Reliance Jio‘s pricing scheme forced incumbent telecom firms to cut voice and data tariffs to ₹1.9 per 1 GB data during January-March of 2017,” it said., adding with the cut in tariff due to stiff competition from Jio, the revenue of other operators fell.
The adjusted gross revenue of the top three telecom companies in India --- Bharti Airtel, Vodafone India and Idea Cellular, decreased by 7.98%, 5.14% and 4.91% respectively, during Q3 of 2016-17 as compared to its previous quarter.
