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 debt of 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 letter further stated that it may be difficult for telecom companies to sustain the pressure. The SBI chairperson stated that the data with them suggests that the total EBITDA of the sector on an annualised basis is Rs 650 billion, which is clearly unsustainable for debt of more than Rs 4 lakh crore.
The SBI chairperson further mentioned that 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.
She said the 5 percent licence fee taken towards Universal Service Obligation (USO) Fund should be dispensed with as mobile services are now pan-India with deep penetration.
However, since then the sector has forged ahead and hugely increased mobile penetration in the country. Given this scenario, banks also lent large amounts to the sector for expansion as well as purchase of spectrum through auctions, she said, adding that as lenders, they are highly exposed to the telecom sector.
By Baishakhi Dutta
