Vodafone Idea Ltd, Bharti Airtel and Reliance Jio Infocomm Ltd, the three major telecom operators, are once again locking horns in the telecom market. While in the past they fought in terms of tariff, this time the battle is related to financial relief on spectrum-related payments. The three players are unlikely to get any financial relief unless they mutually agree that the industry is going through financial stress.
Last month, Kumar Mangalam Birla, Chairman of Vodafone Idea Ltd, met officials from the finance ministry and department of telecommunications (DoT) to discuss the firm’s pending spectrum-related liabilities, reports LiveMint. During the meet, he also flagged concerns related to liquidity crunch in the sector. The meeting was followed by a letter from the Cellular Operators Association of India to the DoT seeking financial relief for the sector.
The current norms dictate that operator needs to pay some amount at the time of purchase of spectrum. There is a two-year moratorium from the date of purchase and the operator has to make the remaining payment over 16 years. Vodafone Idea requested to increase this period from 16 years to 18 years but Reliance Jio opposed that proposal, leading to no agreement among operators.
“The problem is that they are not able to come together as an industry and say there is stress,” the official told the newspaper. “We could have initiated some action if they could come together. If one player is opposing everything, and two players are saying they want relief, then what will the government do?”
The report adds that Vodafone Idea is facing spectrum liabilities worth Rs 3,000 crore due in March 2019. It also has an additional Rs 12,000 crore due in mid 2019-2020, according to a note dated November 22 by Credit Suisse. There is no denial that these incumbent players have been squeezed to find their margin after the entry of Reliance Jio, which made rock bottom tariffs a norm in the industry.
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In the September quarter, Vodafone Idea posted a loss of Rs 4,970 crore while Airtel reported a loss of Rs 118 crore. While other private players have either shut shop or merged with leading players, Airtel and Vodafone Idea are the two players left in the market. In the meantime, the government has initiated an action on the industry’s demand for reviewing import duties on telecom equipment.