NEW DELHI: The country’s largest bank SBI has sounded alarm bells over troubles of the telecom industry with its chairperson Arundhati Bhattacharya writing to the government regarding “highly unsustainable levels” of debtof mobile companies. Telecom industry’s debt to the banking sector is estimated at Rs 4 lakh crore.
SBI is understood to be carrying the largest exposure to the telecom industry, and Bhattacharya is now seeking duty waivers and deferred spectrum payments to save the bleeding telecom companies.
“The 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 EBITDA (earnings before interest, taxes, depreciation and amortisation) of the telecom service providers,” Bhattacharya wrote in a letter to telecom secretary Aruna Sundararajan.
The letter further stated that it may be difficult for telecom companies to sustain the pressure. “The data with us suggests that the total EBITDA of the sector on an annualised basis is Rs 65,000 crore, which is clearly unsustainable for debt of more than Rs 4 lakh crore,” the SBI chairperson said.
The SBI chairperson said there was a need for “immediate intervention to stem the slide” and the government should offer a bailout deal to players.
The relief package should include “deferred payment liability” for spectrum purchases that should be aligned to the life of the spectrum holding by telcos, which is 20 years. Against the current payback plan where companies need to pay for spectrum in 10 years after a two-year moratorium, Bhattacharya suggested a moratorium of five years and repayment in 15 years thereafter.
The SBI chairperson also sought “rationalisation of regulatory charges” in view of the “heavy burden of industry-specific levy” on telecom companies. She said against the proposed 18% GST rate, the government should bring it down to 5%, “given the criticality of the sector to the Indian economy and cellular service becoming a necessity today”.