COAI wants Govt to address financial crisis in telecom industry

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Cellular Operators Association of India (COAI) has said that the Government should address "utmost urgency" the financial crisis in the telecom industry, PTI reported.

COAI wants Govt to address financial crisis in telecom industry

"We are glad that RBI has taken note of our contention that the industry is in financial stress. We had warned continuously that companies are hard pressed to make payments to the government and the banks," said COAI Director General Rajan Mathews

The reports say that his comments come after Reserve Bank of India (RBI) asked banks to make higher provisioning for the telecom sector starting from the current quarter as the sector is in under stress due to a financial crisis.

The sector is in under pressure due to increasing pressure after the entry Mukesh Ambani-led Reliance Jio and a debt of about Rs. 4.6 lakh crore.

SEE ALSO: Jio's new offer will have cascading impact on Government revenue, says Rajan Mathews of COAI

Rajan in a recent interview to GizBot also mentioned that the new offer by the Jio will continue to eat the revenue stream and is going to have a cascading impact on Government revenue, payments to banks as well as equipment manufacturers and service providers to the industry.

To recall, former Telecom Secretary JS Deepak has written a letter to Telecom Regulatory Authority (TRAI) of India asking it to restrict the period of 'promotional offers' by telecom players, as the government loses Rs. 800 crore revenue.

The central bank's notification said the bank boards should review the telecom sector loan by June 30, "and consider making provisions for standard assets in this sector at higher rates so that necessary resilience is built in the balance sheets should the stress reflect on the quality of exposure to the sector at a future date."

"There appears to be an urgent need to revisit and review its tariff orders in the larger interest of the government revenues as well as the telecom sector," Deepak has written in his letter on February 23 to Telecom Regulatory Authority of India (Trai) chairman RS Sharma.'

The letter also explains how the government revenues from just the license fee have fallen from Rs. 3,975 crore in the June quarter to Rs. 3186 crore in the December quarter of the current financial year.

"Besides, banks should also subject the exposure to the sector to close monitoring," the RBI notification said.

While reviewing the sector, the banks should review quantitative and qualitative aspects like debt-equity ratio, interest coverage ratio, profit margins, ratings upgrade to downgrade ratio, sectoral non-performing assets/stressed assets, industry performance and outlook, legal/ regulatory issues faced by the sector, etc. Besides, sector specific parameters should also be taken into consideration, the notification said.

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