India’s telecom regulator said there are “limited” prospects for reviving as many as three mobile- phone service providers as their equity has been wiped out because of rising losses.
Earnings before interest, depreciation, taxes and amortization at two to three companies is negative, Rahul Khullar, chairman of the Telecom Regulatory Authority of India, said at an interview today at the Kotak Institutional Equities investor conference in Mumbai titled “Chasing Growth.”
“It’s no longer possible for many companies to carry on like this,” Khullar said, without identifying any wireless service provider. “Small companies will anyway have to exit. They are bleeding. Turnaround prospects are limited.”
India’s mobile operators have combined debts of $23 billion, according to Cellular Operators Association of India, an industry lobby, whose members include Bharti Airtel Ltd., Vodafone Group Plc’s local unit and Idea Cellular Ltd. The government is seeking to raise at least 700 billion rupees ($12.9 billion) from the operators through spectrum sales and a one-time fee by March to help pare the budget deficit.
Mobile-phone companies including Tata Teleservices Maharashtra Ltd. and Norway’s Telenor ASA lost subscribers after the Supreme Court canceled 122 licenses in February 2012 saying that their allocation had flouted rules. Service providers will have to “pay exponentially higher rates just to start from scratch if they want to continue,” said Rajan Mathews, director general of COAI.
“But the people who were going to fold have already folded,” he said. “Everyone remaining has deep pockets and are likely in it for the long haul.”
Companies including Idea and billionaire Anil Ambani’s Reliance Communications Ltd. have increased call rates though not enough to cover the mounting cost of owning and operating mobile airwaves in India, said Mathews.
Reliance Communications had 385.6 billion rupees of debt as of Dec. 31, while Bharti Airtel had 744.1 billion rupees on liabilities, according to data compiled by Bloomberg.
Bharti and Vodafone’s local unit, India’s largest operators, have scaled back on discounts to compensate for costs. Vodafone India CEO Marten Pieters said the industry requires actual increases in tariffs for companies to remain viable.
“This country has seen telecom tariffs fall for 18 years,” Pieters said at the Kotak conference. “The industry is in repair mode and will see some hikes now.”
To contact the reporters on this story: George Smith Alexander in Mumbai at firstname.lastname@example.org; Anto Antony in Mumbai at email@example.com
To contact the editors responsible for this story: Kartikay Mehrotra at firstname.lastname@example.org; Michael Tighe at email@example.com