Telecom sector to consolidate further: Kotak Institutional

In last three years, India’s telecom industry has gone through a massive consolidation phase with the number of operators coming down to four from around a dozen.
Telecom sector to consolidate further: Kotak Institutional

Reeling under huge financial stress, the Indian telecom industry will consolidate further if the government does not offer a material relief on AGR liabilities, regulatory levies and potentially a floor on pricing, a report noted. A ‘no material relief’ scenario would be an industry-structure-altering one, it added.

“We believe that the Indian wireless industry would consolidate further in case the government does not offer a material relief on ... the AGR (adjusted gross revenue) case liabilities ... other aspects like recurring regulatory levies, deferred spectrum payments and ... potentially a floor on pricing,” said Kotak Institutional Equities.

In last three years, India’s telecom industry has gone through a massive consolidation phase with the number of operators coming down to four from around a dozen.The government, however, is considering requests for financial relief for the beleaguered telecom sector, Finance Minister Nirmala Sitharaman said on Friday, a day after two of the largest telcos — Vodafone Idea and home-grown Bharti Airtel announced combined second-quarter losses of over Rs 74,300 crore.

Bharti Airtel and Vodafone Idea are liable to pay some Rs 92,000 crore in back - fees and penal interest to the government after a Supreme Court ruling in October, which widened the scope for calculating AGR for a telecom firm to include income from non-telecom related earnings.

Analysts say bankruptcies in the sector are possible given the huge credit exposure of this sector which stands at Rs 1.37 lakh crore. Stung by colossal losses, Vodafone Idea has said its ability to continue as a going concern is dependent on obtaining relief from the government and positive outcome of the proposed legal remedy.

Related Stories

No stories found.

X
The New Indian Express
www.newindianexpress.com