Role of IT/IS in improving quality of life: Present and FutureGroup 11Ajitesh Kumar PGP/21/130Gaurav Suri PGP/21/146Kumari Ity PGP/21/151Vaibhav Agrawal PGP/21/183?RecommendationsOver the period 2013 – 2018, the telecom sector has witnessed rising debts due to numerous issues such as extensive network capital expenditure, fierce competition for acquiring 2G, 3G and 4G spectrum and changes in government policies.
Between 2016-17, price wars instigated by Reliance Jio has led to a stark reduction in EBIT of leading players such as Airtel and Idea Cellular thereby substantially reducing the interest coverage ratio. As the ability of leading telecom companies to service their outstanding debt declines, it becomes imperative for the Government of India to step in and prevent an increase in non-performing assets. Following are our recommendations: 1) Deferred Payment Liability – Spectrum auctions leave a huge dent on the balance sheet of telecom companies. This is expected to continue in the coming years as India makes the transition to 5G. As a result, there is a need to increase the time required for repayment of spectrum purchases.
This would provide immediate relief for telecom majors as well as space out the debt over a longer period.2) Ease of Mergers and Acquisitions – Existing licensing, spectrum trading and M&A laws within India are cumbersome and lead to high litigation costs for companies. Removing such barriers to M&A within telecom through streamlined processes would promote consolidation in the sector.3) Dispense mandatory contribution to USO Fund – The USO or Universal Service Obligation fund was established to promote spread of ICT services across the remote or poorer regions in the country. With India reaching 1.
17 billion subscribers in October 2017, there is a strong argument to suggest that telecom companies should no longer need to pay the mandatory 5% license fee towards USO.4) Lower tax levies and spectrum usage charge – With the introduction of GST, telecom services were put in the 18% tax. This led to a significant impact on the already bleeding balance sheets of telecom majors. To prevent rising debt, it would be advisable for the government to reposition telecom services in a lower tax bracket as well as reduce minimum spectrum usage charges.