Promotional plans help retain customers but telecom companies lose revenue, says DoT

Department of telecommunication (DoT) has observed almost 30% sequential fall in licence fee collections from the telecom companies in the first quarter of 2017, and the reason it says is the huge number of promotional plans that resulted in these telcos losing revenue.

It all began with the launch of Mukesh Ambani-backed Reliance Jio services, which offered free voice calls and data to its subscribers. As more and more customers started to use Jio, incumbent telcos had to start offering promotional plans, resulting in the loss of possible revenue.

Also read: Sunil Bharti Mittal calls Reliance Jio unfair competition

This even led to these telcos seeking some exceptions and relief from the government, so that they can get over this financial stress, said telecom minister Manoj Sinha.

Also read: Glitch in 4G dual-sim smartphones hampering quality; phone makers seek government’s help

A 12-page presentation from DoT says that while it collected Rs 3,165 crore in the Oct-Dec 2016 quarter, the collection fell to Rs 2,300 crore in the quarter ending March 2017.

The spectrum usage charge (SUC) collections also fell from Rs 1,553 crore to Rs 1,416 crore during the same period.

This is the first time in several years that there has been a drop in licence fee collections, which had been growing at an average of 8% between 2010-11 and 2015-16.

Also read: TRAI orders Reliance Jio to withdraw Summer Surprise offer

"In the long term, lower tariffs may not be sustainable with ongoing capex requirements for meeting the growth of telecom services. Continued falling trend in industry revenue will impact the investment and repayment capacity of the industry," said the presentation.

It was only last week that TRAI had lashed out at DoT when it blamed the regulating body for the weakening health of Indian telecom sector. TRAI had then asked DoT to curb promotional offers going beyond the period of 90 days.

(Image source Initiate India)