The massacre in the telecom segment has poorly affected the earnings of the government, with income of the sector taking a huge bang.
As Reliance Jio released a wave of highly-cutthroat costing after its rollout in September 2016, the profitability and revenue of the industry came under stress. Firms such as Vodafone, Bharti Airtel, and Idea Cellular had to reduce tariffs to level up the newbie.
The miserable time for the sector resulted in a drop in the earnings of the government from the segment. Collections from license fee and SUC (Spectrum Usage Charge) have seen disturbing falls.
As per the numbers rolled out by TRAI (Telecom Regulatory Authority of India), the gross income of the sector dropped to Rs 2.5 Lakh Crore by 9% in 2017, in comparison to Rs 2.8 Lakh Crore in 2016. Collection of the license fee in 2017 for the government dropped to Rs 12,975 Crore by19%, in comparison to Rs 15,975 Crore in 2016. This can be a concerning factor for the administration as it seems to power the financial deficit, pegged at GDP’s 3.5% for fiscal of 2017–2018, and 3.3% for fiscal of 2018–2019. The collection by the government from SUC (one more important source of revenue) was dropped to Rs 5,089 Crore by 33% in 2017 in comparison to Rs 7,573 Crore in 2016.
As per industry experts, falling tariffs, continued competition, and decrement in IUC (Interconnection Usage Charge) will also indicate that hard times are expected to remain for some more period.
The anguishes have already resulted in merger, with certain firms agreeing to call it off. Russia’s Sistema, Reliance Communications, and Tata Tele have walked back from the sector, seeing the hard times. Burdened by huge losses, Idea Cellular and Vodafone India have made a decision to combine their businesses to reduce costs and strike operational synergies.