The State Bank of IndiaBSE 0.61 % has, on behalf of the banking sector, asked the Department of Telecom to hasten regulatory decisions to relieve the sorely strained industry.
With alarm brewing over Reliance Communications’ ability to repay its loans, a letter by the country’s largest lender to the DoT secretary said, “Stress in the sector has reached highly unsustainable levels after the entry of new players and launch of free services, which led to erosion of topline and EBITDA.” Last week’s communique by SBI chairman Arundhati Bhattacharya, which has been reviewed by ET, said telecom companies’ cumulative operating profits are inadequate to service their combined debt of Rs4 lakh crore.
In its latest quarterly results, SBI had put around Rs3,000 crore of “standard assets” in the telecom sector on the watch list, out of its total Rs18,821-crore exposure. B Sriram, managing director, corporate banking group, SBI, said, “As the premier bank of the country, we represent the industry in discussions with different stakeholders, even though our own exposure is just 1.4% of our solo book and to about 1% post-merger.” Email to DoT went unanswered.
A couple of days ago, Reliance CommunicationsBSE 2.00 % said its lenders had agreed to hold off repayment till September, by when its merger with Aircel and sale of its towers to Brookfield should be completed. RCom would then make a lump-sum repayment ofRs25,000 crore.
SBI’s letter comes shortly after a detailed representation by banks to the Cabinet Secretary earlier this month, highlighting that stress in the telecom sector could percolate to the financial sector. “There is a need for large scale intervention and policy impetus for the sector to revive,” the letter argues.
Recommendations by SBI to DoT mirror some industry demands, including extension on payments for spectrum, lowering of tax levy, resolution on the disputed calculation of taxable income and speedy decisions on mergers. “We look forward to engaging extensively with you for early resolution,” said the letter.
While SBI’s own exposure to the sector is Rs18,821 crore, the banking sector as a whole is far more exposed, said a person familiar with detail. Also in jeopardy is the Rs3 lakh crore of deferred spectrum payment still due to the government from previous auctions. Debt for Reliance Communications is Rs44,000 crore, Rs23,000 crore for Aircel and Rs30,000 crore for Tata Teleservices. The just ended quarterly results show a significant decline in revenue for all telecom players, this trio being the worst hit.
The price war that began with Reliance Jio Infocomm’s entry has now peaked. A senior official at a top telco said operators no longer have the power to increase pricing, even if the Jio onslaught abates. “Everyone said increase in GST will raise call rates; that isn’t true. We have no ability to increase prices for customers so we will need to absorb any tax increase.”
