Kolkata: A combination of measures from the telecom regulator such as the year-long deferment of zero-interconnect usage charges (IUC) regime and a potential floor price for voice and data services are veritable lifelines that could potentially improve financial viability and brighten business continuity prospects of Indias older carriers, Vodafone Idea and Bharti Airtel, analysts said.Vodafone Idea and Airtel are worst hit by a recent Supreme Court verdict, which backed the governments wider definition of adjusted gross revenue (AGR), and face statutory dues of Rs 53,039 crore and Rs 35,586 crore respectively, which they need to pay up in just over a month from now.
Analysts added that these steps will also help the telcos attract investments to help with the dues.Postponing of the zero-IUC deadline, analysts said, would offer immediate relief to Vodafone Idea and Airtel by way of improved cash flows, in turn, boosting their operating income levels in FY21.
This, especially since Trais regulation allows them to continue charging for voice services, a revenue stream that would have disappeared if the regulator had stuck to the original January 1, 2020, interconnect charges phaseout deadline.Analysts said floor pricing, if approved, will be a long overdue step that could particularly help prevent the likes of Vodafone Idea slipping into bankruptcy.
Some even feel its introduction could open up room for further tariff hikes.A floor price for voice/data is overdue, given the stress in the telecom industry, and would largely be on the lines of the concept of reasonable rate of return allowed in the past to private power companies, Hemant Joshi, partner at Deloitte Haskins - Sells, told ET.Recently, Bharti Airtel chairman Sunil Mittal told ET that regulatory intervention was required to raise the tariffs to first ?200 per person each month and then to ?300, a move which would help the battered telecom sector become viable.The Cellular Operators Association of India (COAI), which represents Airtel, Voda Idea and Jio, has added that the moves would help in attracting big-ticket investments.Goldman Sachs said setting up of floor tariffs, even if somewhat below current prices, would be viewed by investors as a positive outcome for the (telecom) industry as this could potentially ensure more stable competition.
The brokerage though said any price ceiling for voice and data tariffs could adversely impact telco multiples.Trai has invited stakeholder views on whether it should set a floor and ceiling for voice and data tariffs, even while terming the proposal anti-consumer.Jefferies said any floor price set by Trai would be the first instance of the government setting a minimum price, which could lead to similar requests from other sectors.
It added that any benefit from a floor price would depend on the level of data elasticity, in the aftermath of recent price hikes by all three telcos.Airtel, Voda Idea and Jio increased their bundled prepaid tariffs by 14-33% in early December.
The global brokerage also estimates that extension of IUC regime by another year will boost Airtel and Voda Ideas Ebitda or operating income 1/10% respectively in FY21.