The telecom sector is likely to experience three more quarters of losses, hurt by high levies and “unsustainable tariffs,” Cellular Operators Association of India (COAI) director general Rajan Mathews said.
“Under the current scenario, I see at least another three-plus quarters of losses. I do not think the present tariffs are sustainable for the long-term health of the industry,” Mr. Mathews said.
He said the high incidence of levies — licence fee and spectrum usage charges — compounded by upfront payment for radio waves have added to the operators’ woes.
“Already, we have been through two-quarters of losses [this fiscal]. So something dramatic has to happen in the next two quarters and we know that is not going to happen. Clearly, 2018-19 will be a tough year in terms of financial performance for the industry but the beginning of fiscal 2019-20 will see clarity [emerging],” he said.
Tariff war
In 2016, Reliance Industries launched Jio, a new fourth-generation wireless service that disrupted the telecom industry by offering free calls and cheap data on mobile phones. Jio’s entry set off a tariff war, forcing Airtel, Vodafone, and Idea (now Vodafone Idea Ltd.) to cut tariffs. This had dented the industry’s financial metrics and deepened the impact of regulatory decisions like cut in termination charges.
Asked if he expects the mobile rates to fall further or stabilize, Mr. Mathews said, the tariffs are already at affordable levels.
“It is difficult for me to see how much the tariffs can drop,” he said, adding that continued deterioration of revenue stream would be detrimental for the industry as networks will need investments in new technology and wider, better coverage.
For the June quarter, Bharti Airtel had reported a loss of ₹940 crore from its India business, as it bled to retain market play, in the face of free voice calls and cheap tariffs from Jio.
Airtel, however, reported a ₹97 crore net profit on a consolidated basis in the April-June period after taking into account revenues from its Africa business.
On July 30, announcing its last financial result before the merger with Vodafone India, Idea Cellular posted a total income of ₹263.5 crore for June quarter — helped by one-time gain from a sale of mobile towers.