Expect 3 more qtrs of losses for telcos due to unsustainable tariffs: COAI

Industry's financial metrics have taken a hit since the entry of Reliance Jio in 2016 which set off a brutal tariff war, forcing older players such as Airtel, Vodafone Idea to cut tariffs

The telecom sector is likely to experience three more quarters of losses, hurt by high levies and "unsustainable tariffs", a top official of industry body COAI has said.

"Under the current scenario, I see at least another three plus quarters of losses. Why? Because personally, I do not think the present tariffs are sustainable for the long-term health of the industry...," COAI Director General, Rajan Mathews told PTI.

Stating that the high incidence of levies -- licence fee and spectrum usage charges -- compounded by upfront payment for radio-waves have added to the operators' woes, Mathews noted that 2018-19 will certainly be a "tough year" in terms of financial performance of the industry.

 

"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.

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 brutal tariff war, forcing older players such as Airtel, Vodafone and Idea (now Vodafone Idea Ltd) to cut tariffs, denting the industry's financial metrics and deepening the impact of regulatory decisions like cut in termination charges.

Asked if he expects the mobile rates to fall further or stabilise, Mathews said, the tariffs are already at affordable levels.

"It is difficult for me to see how much further the tariffs can drop," he said, adding that continuous 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 the loss of Rs 9.4 billion from its mainstay India business, as it bled to retain market play, in the face of free voice calls and dirt cheap tariffs from Reliance Jio. Airtel, however, reported a Rs 970 million 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 merger with Vodafone India, Aditya Birla Group firm Idea Cellular reported total comprehensive income of Rs 2.63 billion for June quarter - helped by a one-time gain from the sale of mobile towers.