Jio Impact Slows Down Revenues

Intense competition among the telcos is hurting the government's earnings from the sector. Since September 2016, when Reliance Jio started its services commercially, the telecom sector revenues have taken a hit. As a result, the government's revenues are sliding as well, including its income from licence fees and spectrum usage charges. For instance, the government earned Rs 4,314 crore in licence fees in the quarter ending June 2016.

In the December 2017 quarter, the earnings slipped to Rs 3,104 crore. As of now, telcos pay taxes and levies of about 29-32 per cent to the government, including 18 per cent GST, 8 per cent licence fee and 3-6 per cent Spectrum Usage Charges (SUC). All these items seem to have taken a hit, and market experts predict a delay in the recovery of the sector's aggregated revenues.

A report from the rating agency ICRA says that "amidst this market share battle, the cash flows of the industry continue to suffer?2017/18 revenues to decline by 13 per cent?Given the current levels of competition and pricing regime, recovery in revenues and profitability is expected only by the end of 2018/19." The spectrum auctions will not help much, as the sector's financial health does not allow telcos to bid aggressively.

Manu Kaushik