INSUBCONTINENT EXCLUSIVE:
The turmoil in telecom sector, which began with the advent of Reliance Jio, deepened in 2017
With the entry of Mukesh Ambani-led Jio Infocomm in 2016, the telecom sector in India has
been in financial turmoil
While the smaller players were soon compelled to go off the business, the pain is now having a ripple effect as it recently hampered the
earnings of the largest telecom company in India: Bharti Airtel
At the same time, Kumar Mangalam Birla-led Idea Cellular's valuation fell drastically in past two months
The share price has shaved off almost 50% of its value and the Ideal cellular share price now trades around Rs 50 per share
After the dust settles in the telecom sector of India, only four companies are expected to sustainable
These telecom giants are Bharti Airtel, Vodafone-Idea Cellular combine, Reliance Jio, and the MTNL-BSNL.On February 12, the promoters of
Idea Cellular -- Aditya Birla Group firms Grasim Industries, Aditya Birla Capital and Hindalco -- had, through their subsidiaries, invested
Rs 3,250 crore in Idea's preferential issue
The investment was made at Rs 99.50 per share.Soon after, Idea Cellular announced the successful closure of its Qualified Institutional
Placement (QIP) on February 23, having issued 42.42 crore equity shares to institutional buyers at an issue price of Rs 82.50 per share
aggregating about Rs 3,500 crore.According to industry insiders, the QIP issue had witnessed interest from investors from both India and
the sharp drop in Idea's share price, there has been a huge erosion in the value of these investments
According to market insiders, "QIP investors also lost heavily by 37 per cent of their investment of Rs 3,500 crore.Bharti Airtel, the most
established player in the telecom sector, posted a 77.79 per cent fall in consolidated net profit at Rs 82.90 crore for the March quarter
The company had posted a profit of Rs 373.40 crore in the corresponding quarter last year.The turmoil which began with the advent of
Reliance Jio and deepened through 2017, saw the weaker players pack up or merge with bigger entities.In 2017, Airtel signed a memorandum of
understanding with Tata Teleservices Tata Teleservices Maharashtra to merge their Consumer Mobile Businesses for a token payment of Rs 1
Even Norwegian telecom giant Telenor had sold out its India business to Bharti Airtel in 2017.Sistema also exited the market in favour of
Reliance Communications, which itself exited the wireless telecom business and sold its towers, spectrum and Media Convergence Nodes assets
to Reliance Jio.According to industry sources, telecom companies together carry a debt of approximately Rs 5 lakh crore
However, the total sectoral liability -- if one takes into account loans from domestic banks, overseas borrowings and annual spectrum
instalments -- is pegged at nearly Rs 8 lakh crore.Successive spectrum auctions over the past seven years -- aimed at increasing government
revenue -- have also contributed significantly to the sector's woes.The price of spectrum in India is among the highest in the world and
telecom firms have no option but to participate in the auctions and buy this expensive "raw material" if they want to stay relevant and
competitive in the business.The companies are, however, finding it extremely difficult to recover the crores of rupees spent in the auctions
at a time tariffs have plunged
In India, average revenue per user (ARPU) is a measly $2 a month -- perhaps the lowest in the world.Revenues from data services were
supposed to flow in with the spectrum in place
But that has not materialised either
Global rating agency Fitch had earlier noted that monthly data consumption levels in Asian markets such as China, Hong Kong, Korea and Japan
were nearly three to five times higher than in India.The entry of Jio in September 2016 has added to the troubles of existing players as
their primary revenue earner -- voice, accounting for over 80 per cent of revenues -- was suddenly being given away free.(This story has not
been edited by TheIndianSubcontinent staff and is auto-generated from a syndicated feed.)
