The crisis in the Indian telecom sector has deepened, with the Indian major Vodafone Idea posting the highest-ever loss by any company in a quarter at $7.2 billion for April-September, which is to be compared with $706 million for the same period last year. Similarly, yet another Indian telecom major, Bharti Airtel, posted a loss of $3.2 billion in the April-September quarter.
Experts argue that the falling profitability does not augur well for 5G's launch, which India is planning for next year, as with limited resources, the telecom companies may not be able to bid. Also, this will hurt the Indian banking system, as they are exposed in terms of loans to the sector. Additionally, Indian consumers will also have to face poor services, as the companies will not be able to invest in improving the service.
Speaking to Sputnik, Hemant Joshi, Partner (Telecom), Deloitte said, “[The] Indian telecom sector is facing huge challenges. There is no money left for participating in 5G auctions. As of now even the operations are becoming a challenge. Services are definitely going to get impacted. When the companies are not able to run the operations, maintaining the network will become a huge challenge”.
Indian Telecom Minister Ravi Shankar Prasad has earlier said that the 5G spectrum auction will be conducted by the year-end or early next year. However, telecom analyst Kunal Bajaj is also sure that companies will not be able to participate. “With this kind of profitability levels, telecom companies cannot participate in the 5G auctions next year”.
A recent ruling by India's apex court upholding the Adjusted Gross Revenue norms decision by the Indian Telecom Ministry has made telecom firms liable to pay hefty fines, thereby hurting their profits. Analysts feel the current situation is also worrying for banks like the State Bank of India and HDFC, who have high exposure to the sector. “The Indian banking sector owes $114.2 billion to the telecom sector. There is a huge debt overhang. At this point in time, volatility in the sector is a matter of concern for [the] banking sector too”, said Joshi.