Inter-ministerial panel to examine financial stress in telecom sector

It will also recommend policy reforms and strategic interventions for the telecom sector

An inter-ministerial panel has been constituted to suggest policy reforms for the telecom sector, which is reeling under severe financial stress.

The panel, comprising senior officials from the ministries of finance and telecom, will examine the "systemic issues affecting viability and repayment capacity in the telecom sector and furnish recommendations for resolution of stressed assets at the earliest".

The panel will also recommend policy reforms and strategic interventions for the telecom sector which has a staggering debt of Rs 4.6 lakh crore.

The eight-member group is also authorised to invite nominees from the telecom sector and financial institutions and co-opt any other member, according to an office memorandum of the Department of Telecom (DoT).

The group has been constituted at a time when the telecom sector - despite a burgeoning subscriber base - is facing severe financial pressure, compounded by the entry of aggressive Reliance Jio.

In September 2016, billionaire Mukesh Ambani's venture Jio stormed into the Indian telecom market with free voice and data services, forcing established operators to slash rates to protect their turf.

This put revenue and profitability of all telcos under stress, although subscribers benefited from cheap data and voice packs.

Even after launching its paid services post-March 2017, Jio continues to be aggressive, offering data at rock-bottom prices while voice calls are free.

The latest earnings season has further deepened the worry lines - India's largest telecom operator Bharti Airtel recently reported its lowest quarterly profit in four years as net earnings fell 72 per cent in January-March.

Smaller rival Idea Cellular posted a loss of Rs 325.6 crore in the three-month period ended on March 31, 2017.

Airtel, in a post-earnings investor call last week, hoped that the government panel would take a "prudent view" of the industry's demands, including the one on deferred payment for spectrum.

The intense competition has not just squeezed the margins of telecom companies but has also raised fears of defaults on loans taken from banks.

The Reserve Bank, last month, has asked banks to review their exposure to telecom and make higher provisions to safeguard their business against any future stress.