Bharti Airtel’s MD Gopal Vittal rings alarm bells

The telecom industry’s financial health is at its weakest ever with a massive debt burden that exceeds Rs 4.5 lakh crore, Gopal Vittal, Bharti Airtel’s managing director for India and South Asia, said at the ET Telecom India Mobile Congress on Friday. His comments underscored recent warnings that the industry was coming under tremendous pressure following the entry of Reliance Jio Infocomm with offers of free voice for life and cheap data that had unleashed a tariff war which the incumbents could ill afford and forced a round of consolidation.
Vittal called on the government to improve ease of doing business in the telecom sector to help shore up its finances. He pointed out that the return on capital for companies was as low as 1%. “You might as well instead invest in fixed deposits and make a much higher return without taking the additional responsibility of setting up the network, BTS (base transceiver stations) and so on,” Vittal said.
However, he lauded the Telecom Regulatory Authority of India (Trai) for its recent consultation paper on ease of doing business in the sector, saying that it was important for the government to simplify procedures so that companies could invest in the capital-intensive mobile broadband. Jio’s free voice and data services have cost the government Rs 685 crore, prompting the Telecom Commission (TC) to pull up the regulator for “jeopardising” the health of the sector by allowing the offers to continue beyond the stipulated time, ET had reported last month.
Following that, outgoing telecom secretary JS Deepak wrote to the telecom regulator asking it to restrict the period of ‘promotional tariffs’ offered by telcos which can stretch up to 90 days, as such offers have robbed the government of almost Rs 800 crore in revenue and also affected the telecom industry.
Addressing some of the concerns of the industry, Aruna Sundararajan, secretary, ministry of electronics and information technology, said that over the past two years the government has striven for a policy environment that enabled telecom operators to grow and invest more.
“As far as the debt overhang issue is concerned, it cannot be addressed overnight,” Sundararajan said. She added that telecom companies, banks and the government will have to work together on finding a solution. “We need to take a holistic view on what needs to be done.”
Sundararajan, who has had a stint in the department of telecom earlier, said that because of the duty differential brought in by this government, manufacturing — especially mobile manufacturing — has received a huge push. “Even Apple is actively looking at coming to India,” she added.
Vittal also called for a “one India, one licence” policy, saying the time had come to merge all the 22 licensed service areas into one large unit — “the way Airtel recently killed national roaming”, he said, referring to the company scrapping roaming charges to create one unified ‘circle’.
INDUSTRY UNDERGOING TRANSFORMATION
The telecom industry is undergoing a transformation as consolidation takes hold and with mobile broadband becoming the growth driver. “The telecom industry is undergoing a dramatic restructuring.
We entered an agreement with Telenor, Aircel and Reliance Communications are combining, Idea Cellular and Vodafone are also joining hands,” Vittal said. “We will see the number of telecom operators reducing from 10 to just about four or five.”
While mobile broadband is creating the next wave of growth, the government needs to help the industry make the requisite investments by freeing up resources for capital investment instead of hefty payments toward spectrum and multiple tax levies.
“Spectrum pricing in India is five to seven times higher than anywhere else in the world and the government must decide whether it wishes to tap revenue from telcos or wants them to invest the same resources in broadband infrastructure,” Vittal said.
He also said that taxes and levies currently account for almost 40% of revenue generated by the sector and this burden was further hurting the industry, which needed to recoup its earnings into developing the latest mobile broadband infrastructure.
He reiterated a longstanding demand of the telecom industry — to impose a moratorium on the universal service obligation fund or the USOF, to which telecom operators contribute 5% of adjusted gross revenue annually.
USOF aims at connecting those who live in remote areas and may otherwise be left out of the digital loop.
Vittal also repeated the complaint of incumbent telecom operators asking for “same service, same rules”. The telecom operators want over-the-top (OTT) service providers in the communication services to be brought under the same regulatory scanner that telcos are subject to.