Factbox: India’s telecom sector on the ropes after $13 billion levy ruling

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(Information) – India’s telecoms sector has been rocked by a Supreme Court docket ruling final month that sided with the federal government in a dispute over how levies are calculated, saddling the trade with a mixed $13 billion in contemporary debt.

Under is a rundown of India’s telecoms sector, as soon as the poster youngster of the nation’s liberalisation push, and its present woes.

THREE MAJOR CARRIERS

Simply three carriers – Vodafone Thought Ltd (VODA.NS), Bharti Airtel Ltd (BRTI.NS) and Reliance Jio Infocomm Ltd [RELIB.UL] – serve 90% of the nation’s 1.18 billion cell subscribers. Every management about 30% of the market.

Vodafone Thought, a enterprise between the native unit of Vodafone Group (VOD.L) and India’s Thought Mobile, is the most important with greater than 370 million subscribers.

Jio, managed by Asia’s richest man Mukesh Ambani, entered the market in 2016, launching a brutal value conflict that inspired extra consolidation and collapse of smaller cell operators akin to Reliance Communications Ltd (RLCM.NS), owned by his brother Anil Ambani. It’s now the No. 2 cell service.

Bharti Airtel is backed by Singapore Telecommunications Ltd (STEL.SI), the most important shareholder within the Indian cell service with an efficient stake of about 35%.

THE CURRENT CRISIS

The Supreme Court docket overturned a decrease court docket ruling and agreed with the federal government’s definition of adjusted gross income (AGR), which has been contested by cell carriers for over a decade.

Firms argue AGR ought to comprise simply income accrued from core companies, whereas the federal government says AGR ought to embrace all income, together with, for instance, cash from lease, land gross sales or sale of scrap.

Indian cell carriers pay the Division of Telecommunications almost Three-5% of their AGR in utilization fees for spectrum and eight% of AGR as license charges.

The court docket ruling means corporations need to pay not solely increased charges to the federal government, but additionally clear $13 billion in arrears, penalty and curiosity funds.

WHAT’S OWED

Vodafone Thought must pay greater than 283 billion rupees ($Three.9 billion) whereas Airtel owes roughly 216 billion Indian rupees ($Three.zero billion) to the Division of Telecommunications. The quantities are due by late January.

In response to cries from the sector for assist, the Indian authorities has deferred upcoming spectrum funds for the subsequent two monetary years till March 2022, elevating expectations that it might present extra reduction.

These expectations have bolstered the businesses’ shares, with Bharti Airtel leaping 20.Three% because the ruling and Vodafone Thought gaining four.four%.

A BIG BUT TROUBLED MARKET

Even with out the Supreme Court docket ruling, the market has been powerful going for its carriers.

On one hand, the variety of India cell clients has jumped over the previous decade to 1.18 billion, making it one of many world’s largest telecoms markets by subscriber numbers.

However common month-to-month income per consumer, a key metric to gauge operator well being is low. It fell to 64.30 rupees as of the second quarter in 2018, the final quarter for which the Mobile Operators Affiliation of India has collated information. That’s down greater than 80% from 400 rupees in early 2005.

That slide in income accelerated after deep-pocketed Jio started providing free voice calls and cut-price information plans – a transfer that gave hundreds of thousands of low-income Indians web entry however battered rivals as they sought to maintain up.

(GRAPHIC: India’s cell operators (Interactive): here)

(GRAPHIC: Dwindling common income per consumer here)

(GRAPHIC: Dwindling common income per consumer (interactive) here)

HUGE LOSSES AND MOUNTING DEBT

Vodafone Thought, which had been barely worthwhile prior to now 12 months, plunged to a 509 billion rupees ($7 billion) consolidated web loss within the end-September quarter, largely on account of provisions for excellent funds to the federal government.

Airtel reported a consolidated lack of 230.45 billion rupees within the September quarter, its second consecutive quarter of losses.

In distinction, Jio logged a quarterly consolidated web revenue of 9.9 billion rupees.

The bruising value conflict has additionally resulted in heavy debt ranges. Vodafone Thought’s web debt stood at 1.02 trillion rupees as of end-September, whereas Bharti Airtel’s web debt stood at 1.18 trillion rupees.

(GRAPHIC: Reliance Jio revenue rises, whereas others endure png here)

(GRAPHIC: Airtel & Vodafone Thought debt wores (interactive) here)

(GRAPHIC: Airtel & Vodafone Thought debt woes here)

(GRAPHIC: India’s wi-fi subscriber base here)

(GRAPHIC: India’s wi-fi subscriber base (interactive) here)

Reporting by Nallur Sethuraman and Sankalp Phartiyal; Enhancing by Miyoung Kim and Edwina Gibbs