Telecom sector may default on loan repayments: DoT

The Department of Telecom (DoT) has warned that the sector may default on its loan repayments if the ongoing financial stress continues. Telecom operators cumulatively owe over ₹4.5 lakh crore to various banks.

According to top sources in the Telecom Ministry, JS Deepak, Secretary, DoT, has written to regulator TRAI, asking it to review the situation and take urgent action.

“Being a highly capital intensive sector, there is a continuous need to invest in network upgradation and rollout to provide adequate quality of services both in rural and urban areas,” the official wrote in the note to the Telecom Regulatory Authority of India (TRAI).

“The inability to service debt or meet its repayment obligations can further affect the investment and growth of the industry. Further, the large exposure of banks and financial institutions to the telecom sector, slowdown in growth and potential defaults by telecom companies... can have a serious impact on the banking sector as well,” he added.

The DoT said the ongoing tariff war in the industry, triggered by new entrant Reliance Jio’s promotional offers, was the main reason for the precarious financial health of the sector.

The Department said this could also impact the repaying capabilities of the mobile operators who bought spectrum worth ₹3.45 lakh crore in the last few years.

While ₹1.90 lakh crore has been paid so far, the remainder of ₹3.08 lakh crore, including the interest, is yet to be paid.

Deepak said TRAI has stipulated that promotional offers cannot extend beyond 90 days hence the regulator must implement this rule. TRAI had earlier allowed RJio to continue the promotional offer for an additional 90-day period on grounds that the company had launched a different promotional scheme after the end of the stipulated three-month period.

Deepak disagrees with the regulator’s view.

The DoT had earlier expressed concerns over its own declining revenues as a result of the falling income generated by the operators. The current fiscal will probably be the first time when government revenues from telecom licence fee and spectrum usage charge will fall.