StatsGuru-05-November-12

Telecom sector was to contribute heavily to govt finances this year, butt it has been increasingly stressed

The telecommunications sector was supposed to contribute heavily to government finances this year, through spectrum auctions and licence fees. But it has been increasingly stressed. Additions to the subscriber base have slowed, as Table 1 shows. There continue to be too few rural subscribers, though, with companies continuing to delay their expansion into rural areas. Notably, the three largest companies according to Table 2 — Bharti, Vodafone and Idea/Spice — are also those that have the highest percentage of rural subscribers.

It is also worth noting, as Table 3 makes clear, that gross revenue has largely stagnated for the sector as a whole. How, then, can telecom companies fund their much-needed expansion — as well as the costs the government will impose on them for their use of resources? According to Table 4, debt as a percentage of total assets has gone up across the sector; most sharply for state-controlled MTNL and Bharti, which has made big investments abroad financed by external debt. Few of these companies are attractive targets for further lending.

 

Operating profit figures, visible in Table 5, show a divergence between Bharti, steadily increasing profits, and other companies. MTNL is in the red now, while Idea has managed to triple profits. Tata Communications has stayed where it was, while Reliance has dipped sharply. Note that the advances Idea and Airtel made in operating profits vanish once net profit is looked at — a reflection, in the case of Bharti in particular, of the high interest payments it has to shell out.(Click here for tables)

The sector can probably afford to pay what the government asks, but it will take a toll on the companies. Clearly the stock market, which has kept all shares but Bharti on an even keel so far this year, expects the government to moderate its demands.