Issues Involved: One of the major issues faced by this sector is declining profitability which is further exacerbating the twin balance sheet (TBS) problem. Profitability is being affected by following issues:
- Low revenues – Dramatic reduction of prices & coming down of average revenue per user by 22% due to new entrant.
- High Debt – Unsustainable spectrum prices and low revenue is also leading to high debt. According to industry sources, telecom companies together carry a debt of approximately Rs 5 lakh crore.
- High levies – Government levy on the sector is in the 30 per cent-plus range of international standard. Other South Asian countries such as Pakistan, Bangladesh and Sri Lanka levy in the range of 20s.
- Expensive spectrum – The price of spectrum in India is among the highest in the world but telecom firms have to buy it to remain relevant and competitive in the business
- Competition from over-the-top operators such as WhatsApp as they don’t have to pay taxes or levies to the government.
- Restrictive government policies – for example cross-holding norms prevent a telecom company from owning separate stakes in other operators during mergers and acquisition such as RJio or Airtel cannot acquire a stake in Tata Teleservices or Aircel; they can only buy-out 100 per cent of the company so as to create a merged entity.
- Quality of telecom services – is disappointing due to issues like call drop etc.
- Differential pricing for data services – Although TRAI promotes net neutrality, there are no laws enforcing it.
Recent reduction in Interconnected Usages Charges (IUC) by TRAI has been described by various operators as a huge loss of revenue.