Consolidation due to poor finance

New Delhi: Cellular body Coai on Monday blamed poor financial health of the telecom sector hit by hyper-competition for consolidation in the market.

“Earlier, there were 13 operators, as opposed to the present number of four to five operators. Due to the poor financial health of the sector, we are witnessing mergers, acquisition and combinations of firms. While companies like Videocon and Etisalat have already left the industry because of this hyper competitive pressure,”Coai director general Rajan S Mathews said.

Coai said that there is currently a tariff war in the market (after the entry of Jio) which may not be sustainable for long. “This has also severely impacted the revenue stream of operators, not just in terms of an increase in cost but also in terms of a marked decline in the revenue stream. All these have put the financial condition of this industry at risk and increased the debt to '4.3 lakh crore, also leading to a severe decline in government revenues from the industry,” said the body.

Coai said that since 2008, increased hyper-competition has been impacting revenue streams across all operators. “There has been a continuous increase in expenditure due to high costs of spectrum acquisition and a severe financial burden on the industry caused by extremely high and multiple levies and taxes. Operators have also had to re-acquire spectrum in order to continue operations,” it said.

However, Coai said that this trend of mergers and consolidation, will remain a positive development, benefiting customers, operators and government in the long run on global lines.

“The need of the hour however is, a predictable, stable, long term, regulatory and policy environment, to ensure the financial health of telecom service providers and a conducive environment for continued investments for a fully connected and digitally empowered India,” it added.