Telecom industry to consolidate further in 'no relief' scenario: Kotak Institutional Equities
A 'no material relief' scenario would be an industry-structure-altering one, it added.
"We believe that the Indian wireless industry would consolidate further in case the government does not offer a material relief on...the AGR (adjusted gross revenue) case liabilities...other aspects like recurring regulatory levies, deferred spectrum payments and ...potentially a floor on pricing," Kotak said in a recent report.
Even as the massive AGR-case-related payout is a meaty gross negative for Bharti Airtel, the potential gross positive from industry consolidation will likely result in a net positive outcome, it said adding that Bharti could be a net beneficiary.
Credit Suisse noted that Vodafone Idea faced "another operationally weak quarter" and that the government relief measures are "key to sustain".
The telecom industry has been hemorrhaging, with combined losses of listed mobile firms surpassing Rs 1 lakh crore in the just-ended quarter.
Last week, India's two leading telecom operators Vodafone Idea and Bharti Airtel reported a combined loss of Rs 74,000 crore for the second quarter ended September 2019, mainly on account of statutory dues arising from the recent Supreme Court order on AGR.
The apex court has upheld the government's position on including revenue from non-telecommunication businesses in calculating the annual AGR of telecom companies, a share of which has to be paid as licence and spectrum fee to the exchequer. The ruling over statutory liabilities has triggered a rush for provisioning by telecom companies.
While Vodafone Idea posted a loss of Rs 50,921 crore -- the highest-ever quarterly loss by any corporate in India -- Airtel reported a loss of Rs 23,045 crore.
On Friday, Reliance Communication posted a consolidated loss of Rs 30,142 crore for July-September 2019 due to provisioning for liabilities after the Supreme Court ruling on statutory dues -- marking the second-highest loss posted by any Indian corporate to date.
Airtel, Vodafone Idea and other telecom operators have to pay the government a whopping Rs 1.4 lakh crore following the Supreme Court order that has sent shock waves through an industry already grappling with past losses and billions of dollars in debt.
According to the latest estimates by the telecom department, Bharti Airtel faces a liability of around Rs 62,187 crore (including share of Tata Group of companies and Telenor India), while Vodafone Idea may have to pay about Rs 54,184 crore. The remaining liability is with state-owned BSNL, MTNL and some of the shut/bankrupt telecom companies.
Stung by colossal losses, Vodafone Idea has said its ability to continue as a going concern is dependent on obtaining relief from the government and positive outcome of the proposed legal remedy.
The company is also in the process of filing a review petition against the Supreme Court order.
The Department of Telecommunications had shot off notices to telecom operators to pay their revenue share dues within three months as directed by the Supreme Court. The DoT has given option to telecom operators to clear all the dues on self-assessment basis.Last month, the government also constituted a committee of secretaries to explore a financial bailout package for the telecom sector. MBI HRS
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