India’s telecoms sector under “severe financial stress”

India’s Department of Telecom (DoT) has asked the nation’s finance ministry to cut its target for non-tax revenue to be raised from the telecoms industry by nearly 40% due to the “severe financial stress” the sector is facing.

The Finance Ministry has set a revenue target of 473.04 billion rupees ($7.3 billion) to be raised by the telecom ministry. But the department has asked for this to be cut to 295.24 billion rupees in light of the rapidly declining revenues from all the major operators.

Non-tax revenue from the sector comes from sources including license fees, spectrum usage charges and spectrum acquisition costs. But the DoT believes there is little prospect of holding the next round of spectrum auctions this year.

In addition, because license fees are paid as a proportion of revenue, license fees that had been projected to total around 166.64 billion rupees are likely to decline to 92.55 billion rupees in the current financial year.

Spectrum usage charges are also tracking to be lower than anticipated at 49.7 billion rupees.

Major operators have been grappling with declining revenues since the entry into the market of disruptive pan-Indian LTE operator Reliance Jio Infocomm with its aggressive free services promotion.

While the free service period is now over, experts expect the trend of falling revenues to continue for some time as operators feel the brunt of the large tariff cuts they made to stay competitive.