Telecom infra expansion lags with bearish foreign lenders

NEW DELHI: Telecom operators are struggling to get funds from multinational banks, overseas investors and wealth management companies for infrastructure expansion plans, at a time when local lenders are wary of offering loans even for buying spectrum in the next auction.

“Right now, they (local bankers) are not looking very favourably at the industry… So, that is causing worry for foreign investors as well,” Rajan S Mathews, director general of the Cellular Operators Association of India (COAI), told ET.

COAI represents Vodafone Idea, Bharti Airtel and Reliance Jio Infocomm, India’s three surviving private sector telecom operators. Mathews said funds for the sector from local banks have “more or less dried up”. “Unfortunately, banks are going through the non-performing assets (resolution) process while other companies are having difficulty in servicing their debts. So, banks are not seeing any positive aspect (in the sector),” he said.

India’s telecom sector is weighed down by debt of more than Rs 7.5 lakh crore and is facing pressure on revenue, profits and cash flows owing to continuing price competition. Jio is the only operator making profits, as Bharti Airtel, Vodafone Idea and state-run Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd (MTNL) are all posting losses. Two telcos — Reliance Communications and Aircel – are already in the midst of insolvency proceedings.

Mathews said the government’s recent move to reduce corporate tax rate will not help telecom if the industry’s revenue concerns aren’t addressed, as majority of the players are grappling with losses.

The COAI chief told ET that telcos such as Bharti Airtel and Vodafone Idea are funding most of the capex through equity offerings. Both carriers recently raised Rs 25,000 crore each through their respective rights issues, and are also raising funds by selling stakes in units.

Given the current situation, Mathews said, it is time for the government to give a “serious consideration” to addressing the financial problems of the industry.