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TRAI study reveals telecom sectors growing pains
MUMBAI: With foreign promoters increasing their stakes or purchasing the stakes of Indian promoters in telecom companies such as Aircel, Unitech, Sistema Shyam, Bharti Airtel and Vodafone, the latter’s total shareholding of major telecom access providing companies has dropped from 59.77 per cent in the year 2007-08 to 40.42 per cent in 2011-12. A study paper released today by the Telecom Regulatory Authority of India (TRAI) on shareholding, financing and capital pattern of Indian private telecom access service providers (TSPs) has revealed this.
It attempts to provide an overview of the capital structures (deployment of funds in the form of owners’ equity and loan fund) of companies operating in the telecom sector based on the annual accounts and other information provided by 24 Private Telecom Access Service Providers.
The study paper also points out that while the share of Indian promoters in the equity shareholding declined from 59.70 per cent in 2007-08 to 56.63 per cent in 2011-12, the share of the foreign promoters has increased from 5.30 per cent to 13.90 per cent in the same period. So while Unitech, Tata and Vodafone have reported a decline in Indian promoters’ equity, Bharti, Unitech, Tata, Sistema Shyam, Loop and Vodafone have seen an increase in the stake of foreign promoters in equity shareholding.
The study paper is a comparative study of facts in the year 2007-2008 and 2011-2012. The trend indicates that the preference shareholding of Indian promoters and others has declined from 60.89 per cent (2007-08) to 2.62 per cent (2011-12). This decline is mainly in the case of the Tata group. The share of the foreign promoters in the total preference shareholding has gone up sharply from 0.59 per cent to 95.84 per cent. The increase in foreign promoter’s shareholding is Rs 5,988 crore and is mainly in the Aircel group.
Foreign currency loans for these companies have gone up from Rs 13,929 crore in 2007-08 to Rs 40,045 crore in 2011-12. The increase in foreign currency loans in 2008-09 over the previous year was attributed to the borrowings by Reliance Communications and Idea Cellular. Reliance, Tata, Bharti Airtel and Idea have the major share (88 per cent) in foreign currency loans/bonds outstanding at the end of year 2011-12.
The study shows that Bharti, Vodafone and Reliance have not shown any change in their share capital. Idea’s share capital has increased 26 per cent from Rs 2,635 crore in 2007-08 to Rs 3,309 crore in 2011-12, making it the only TSP showing that kind of growth. Total reserves and surplus in respect of Vodafone have declined from Rs 9,991 crore to Rs 2,975 crore, whereas the total reserves and surplus of other companies have shown an increase. As on 31 March 2012, while Bharti, with Rs 50,470 crore had the highest reserves and surplus; Tata showed negative reserves and surplus of Rs 4,748 crore.
As on 31March 2012, Vodafone had the highest debt of Rs 45,332 crore followed by Reliance at Rs 31,195 crore and Tata at Rs 23,986 crore. Vodafone and Tata have shown persistent increase in debt during the past five years whereas the other three service providers have shown fluctuating trends in debt.
The study also highlights the fall in EBITDA margins for almost all the TSPs over the past five years. Bharti’s EBITDA has gone up from Rs 11,447 crore in 2007-08 to Rs 15,441 crore in 2011-12; however as a margin it has fallen from 41.96 per cent to 33.82 per cent. Vodafone’s and Reliance’s EBITDA has declined from Rs 6,247 crore and Rs 5,175 crore in 2007-08 to Rs 4,248 crore and Rs 3,018 crore in 2011-12 respectively.
Vodafone’s PBIT has declined very sharply from Rs 3,473 crore in 2007-08 to Rs 27 crore in 2011-12 while Tata’s has been negative throughout the period and has declined progressively from a negative Rs 1,194 crore to a negative Rs 2,275 crore over the past five years. Ditto with Reliance which has seen its PBIT fall during 2008-09 and become negative in 2009-10 and 2010-11; however it has improved and become positive in 2011-12.
The study talks about the problems plaguing the TSP sector. It says that “After their initial success, the Indian telecom companies are confronted today with serious growth challenges. The sector is characterised by mounting competition, declining average revenue per user (ARPUs) and rising costs. All these factors have put tremendous pressure on operating margins. The main reason cited by telecom service providers for declining profitability are their inability to pass on cost inflation due to hike in the price of power and fuel, debt servicing burden and the declining value of the rupee. This has been further aggravated by the prevalent tariff competition.”
It goes on to add: “Each telecom service provider is endeavoring to focus on growth and investment, improvement of profitability and cost control without compromising on the quality of service to the customer. Of the several strategies being adopted by the sector to witness growth include: focus on development of network and eco-system for 3G and 4G services; shifting towards outsourcing model where various medium and long term leasing arrangements for towers and other network infrastructure have been made with the third party operators or equipment vendors; maximising share of passive infrastructure in the short-term and initiating efforts to share active infrastructure over the longer term etc.”
The study concludes that the low market tariffs and the presence of large number of service providers in each licence service area have caused profitability to decline and made the telecom sector less attractive for infusion of equity.
New investments are therefore being financed through debt. Sector indebtedness is growing. However, the sector’s debt-equity ratio has not as yet reached alarming proportions. On the other hand, the declining profitability of the sector, which lies at the root of the inability to attract fresh investment, is a cause for deep concern.
The study also indicates that some portion of debt is being utilised for interest payments and other liabilities rather than for acquisition of new assets, which potentially places the companies in a debt trap. Replacing debt financing by equity financing could help increase profitability by reducing the interest burden.
The report published by the TRAI also says that in order to turn around the financing pattern and the deteriorating profitability position of the sector, apart from measures and strategies of individual companies, clarity needs to emerge on the following policy issues and optimal utilization of resources:
· Emergence of an enabling environment for mergers and acquisitions to aid in market consolidation;
· Permission and policy framework for sharing, trading and sale of underutilised or unutilised spectrum by service providers so that spectrum is optimally utilised;
· Liberalisation of spectrum usage to enable flexibility in deployment of alternative technologies;
· Improvement in the availability of power to run telecom networks so that network operations require less fuel and captive power generation.
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Rising Bharat Summit 2026 spotlights India’s global ascent
PM Modi keynotes two-day event with ministers, diplomats and icons in New Delhi.
MUMBAI: India didn’t just host a summit, it threw a coming-out party for a nation ready to own the global stage. The News18 Rising Bharat Summit 2026, held on 27–28 February in New Delhi, emerged as a high-octane platform for ideas, vision and strategic dialogue, uniting national leadership, global policymakers, industry titans, defence strategists and cultural icons under the theme “Strength Within”.
Prime minister Narendra Modi set the tone with a keynote that framed India’s resurgence as a reclaiming of lost potential built over generations. “In previous industrial revolutions, India and the Global South were merely followers,” he said. “But in the era of Artificial Intelligence, India is a partner in decisions and shaping them.” He highlighted the country’s thriving AI startup ecosystem and the recent AI Impact Summit attended by over 100 nations.
Union minister Piyush Goyal (Commerce & Industry) stressed India’s readiness to scale exports and deepen manufacturing, while Ashwini Vaishnaw (Railways, I&B, Electronics & IT) positioned technology and infrastructure as twin engines of growth, especially in AI and digital trust. Jyotiraditya Scindia (Communications & North East Development) revealed India’s ambition to lead in 6G through the Bharat 6G Alliance and partnerships with over 30 countries.
Global voices added depth: former Singapore Foreign Minister George Yeo called India’s development “self-sustaining” and strategically vital; ex-UK Chief of Defence Staff General Sir Nick Carter asserted India deserves a seat at the great powers’ table; and former US Commerce Secretary Carlos M. Gutierrez joined ambassadors from Norway, Germany and Sweden in discussions on geopolitical realignment, sustainability and defence preparedness.
Other speakers included veteran investor Ramesh Damani, World Gold Council CEO David Tait, Vianai Systems founder Dr Vishal Sikka, DeepTech Bharat Foundation co-founder Shashi Shekhar Vempati, defence experts Rajesh Kumar Singh, Sunil Ambekar, Patrick McGee, Tom Cooper and Adrian Fontanellaz, plus cultural and sporting icons Kangana Ranaut, Saina Nehwal, PR Sreejesh, Mohammed Shami, Yuzvendra Chahal, Mithali Raj, Anil Kapoor and Yami Gautam.
The summit was supported by Jio Financial Services (Presenting Partner), Phonepe and DS Group (Co-Presenting Partners), Pernod Ricard India and Kia Seltos (Powered By & Driven By), state governments of Uttar Pradesh, Chhattisgarh and Uttarakhand (State Partners), and associate partners including NSE, M3M Foundation and Reliance Industries.
Broadcast live across News18 Network, CNBC-TV18 and CNBC Awaaz, the event reinforced India’s image as a confident democracy and emerging global power proving that when strength comes from within, the world can’t help but watch.
