Reliance Jio vs Airtel, Vodafone, and Idea as IMG Panel Looks Into Telecom Sector Woes

Reliance Jio and Airtel, Vodafone India and Idea Cellular were at each others' throats on Monday as the Mukesh Ambani-backed accused the incumbents of milking the telecom sector using borrowed money. On the other hand, the older players said free Reliance Jio services for the financial woes the industry is facing. Jio also accused Airtel, Vodafone, and Idea Cellular of cartelisation, and said their financial problems are because of not investing in new technology. This happens as an inter-ministerial group (IMG) has begun hearing operators on reasons for telecom sector being dragged towards loan defaults.

While the 'big three' will make presentations to the IMG on June 16, Reliance Communications has said that FY17 was the first time since inception that the industry's revenue and operating profits declined, primarily because they were forced to match free Reliance Jio services. Jio, on the other hand, blamed the incumbents for the financial woes saying they stretched the balance sheets through extensive borrowings without bringing in any equity money.

Reliance Jio Says Rivals' Failure to Invest in Tech Causing Financial Stress

While the Mukesh Ambani-owned firm blamed availability of easy credit to buy spectrum for worsening the situation, other operators said reduced cash flows were hampering capacity of telecom companies. Jio, run by India's richest man, said that the incumbents need to infuse Rs. 1 lakh crore to Rs. 1.25 lakh crore immediately, as well as spectrum liabilities need to be paid upfront instead of deferred payment route.

RCom's policy prescription to the government included reduction in licence fee to five percent and one percent flat spectrum usage levy along with a three-year moratorium on these payments. The debt-ridden RCom - which recently got a seven-month reprieve from lenders to service its huge debt - also wants the period of repayment for deferred spectrum charges to be extended to 20 years which is the life of the spectrum.

PTI sources in Telecom Department said the IMG will meet banks including SBI, PNB, Axis Bank and HDFC on June 14 to discuss the telecom industry's financial difficulties.

Telecom PSUs Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd will be meeting the IMG on Tuesday, while Airtel, Vodafone and Idea are slated to make presentations before the government panel on June 16.