The massive fundraising exercise in telecom sector via rights issue underpins the seriousness of promoters and their continued faith in fundamentals and dynamics of the market despite “adverse circumstances” and “structural issues”, that need to be urgently fixed, COAI has said. According to COAI Director General Rajan S Mathews, it shows the seriousness of the players to continue to fund their operations adequately. “Companies are facing severe economic turbulence from issues that could have been fixed by the government, viz 30 percent levies and taxes that the government continues to extract from the industry. Plus the debt factor and its overhang,” Mathews told PTI.
The industry has taken a responsible call to infuse fresh funds in “some very adverse circumstances”, he noted. “This, to my mind, is a responsible decision in some very adverse circumstances, the responsible decision of promoters putting in money, showcase their faith in future of the industry and their ability to continue to operate. If you look, the last two years should not have given anybody that high level of confidence in wanting to do this,” he said. Cellular Operators’ Association of India (COAI) hopes that the new government post election, would set out a clear roadmap to ease the burden of levies on the telecom sector, and issues including cut in licence fee and spectrum charges would be taken up at the earliest.
Citing the ‘National Digital Communications Policy 2018’ which prioritises universal coverage rather than revenue maximisation, Mathews said, “we understand, that the Prime Minister’s Office has asked all departments to give 100 day action plan, and I believe that any action plan for the telecom department should clearly indicate this among the critical parameters.” The players are showing their commitment to the long-term prospects of the sector, and their concerns around structural issues and licensing regime need to be fixed at the earliest, he said. “This type of rigidity which comes from a control-oriented licensing regime coupled with regulations which have to obviously support that rigidity…it becomes all the more difficult for mobile industry which is heavily focused on growth, technology and changes.
I think we need to relook at this, quickly,” Mathews added. Over the past few years, India’s telecom market had become cut-throat where nearly a dozen players jostled for market share, pummelling the call rates to among the lowest in the world. Competition has only intensified since 2016, when Reliance Jio Infocomm, owned by Mukesh Ambani, stormed into the market and offered lifetime free calls and dirt cheap data. Jio’s disruptive offerings forced rivals to slash rates, affecting profit margins.
Since its launch, rivals have either merged, resorted to acquisitions or folded up, matching its high-speed 4G offering. Lately, the sector has seen a massive fund raising exercise – Vodafone Idea has concluded over Rs 25,000 crore rights issue, that was oversubscribed nearly 1.08 times. Bharti Airtel, too, is in the midst of a Rs 25,000 crore rights issue, which is slated to close on May 17.―Financial Express