Reliance Jio on Monday said the financial stress in the telecom sector was mainly due to incumbent operators running the business on debt while not investing in new technologies.
In a presentation to an inter-ministerial group formed to examine the telecom sectors financial woes, alleged that the financial stress of the telecom sector is mainly due to incumbent operators running the business on debt while not investing in new technologies.
The Mukesh Ambani-led firm said the existing operators “made significant returns” over the years but have not invested in equity. Their excessive dependence on debt has led to “unsustainable balance sheets,” the company added.
Reliance Jio further alleged that there was reluctance on part of the company promoters to dilute shareholding to raise funds for investment in new technologies, while they invested in “unrelated businesses or overseas acquisitions by borrowing extensively.”
It said that there is a “strong sign of cartelisation” in the behaviour of the three big operators “as tariffs were aligned and designed to thwart entry of new operators,” adding that both TRAI and CCI have found evidence of cartelisation in the behaviour of Bharti Airtel, Vodafone and Idea.
The new entrant said that the incumbent operators are not investing in technology, while passing the blame on to Reliance Jio for the sector’s problems.
The incumbent telecom operators have attributed declining profits to promotional offers by Reliance Jio who was offering free voice and data services to users since launch in September up till March end under two different plans.
Reliance Communications, too, met the inter-ministerial group where it reiterated its earlier demands of reduction in licence fees to 5% from the existing 8%; reduction in spectrum usage charge to a uniform rate of 1%; and deferred payment of spectrum charges.