The Department of Telecommunications (DoT) has asked the finance ministry to slash the non-tax revenue targeted from the telecom industry for this fiscal year by over a third. Plunging tariffs due to promotional offers and the limited ability to invest in capital expenditure are set to erode telecom companies’ financials, which have already taken a hit in the past two quarters.
The telecom department has asked that revenue estimates from the debtladen sector be reduced by 37 percent to Rs 29,524 crore for the financial year ending March 2018, instead of the Rs 47,304 crore set out in the Union Budget in February, member, finance, Anuradha Mitra, wrote to secretary of economic affairs Tapan Ray. ET has seen a copy of the June 1 letter.
Challenge for government
The call for a sharp cut in revenue collection estimates from a sector that fetched Rs 78,715.01crore for the government in FY17 comes after the government had already reduced its expectations once earlier.
In the Union Budget early this year, telecom sector revenue projections were set at Rs 44,342.2 crore for FY18, down 55 percent from the year-before expectations of Rs 98,994.93 crore.
The department expects licence fee estimates for this fiscal to plunge by nearly half to Rs 9,255 crore and the spectrum usage charge (SUC) to drop more than 35 percent to Rs 17,056 crore.
It also expects zero revenue from spectrum sales even if there is an auction this fiscal, as service providers may not bid for airwaves given their highly leveraged balance sheets, Mitra said. FY17 gross revenue for the sector fell Rs 26,000 crore, or 11 percent, to Rs 2.1 lakh crore from the year earlier.
“In view of the severe financial stress in the sector and rapidly declining revenues of all major telecom service providers, revenue targets for DoT for budget estimates 2017-18 will actually require a downward revision,” Mitra said in the letter.
Any cut in the revenue target from telecom would make it more challenging for the government to meet its overall non-tax revenue target of Rs 2.88 lakh crore, which also includes proceeds from disinvestment. The fiscal deficit target for FY18 is 3.2 percent.
The communication from DoT to the finance ministry comes in the background of an inter-ministerial group (IMG) — set up to look into the deteriorating health of the sector — meeting all telcos and banks to come up with solutions for revival of the industry reeling under a debt of about Rs 7.29 lakh crore and facing huge pressure on revenue and profitability, intensified by the entry of Reliance Jio Infocomm last September.
Some banks have already raised concerns of loan defaults while the industry itself has been pushed into consolidation mode. - ET