1. Raising deferred payment period of telcos to 16 yrs to provide cash flow relief of Rs 55,500 cr

Raising deferred payment period of telcos to 16 yrs to provide cash flow relief of Rs 55,500 cr

The recommendation made by the inter-ministerial group (IMG) for increasing the deferred spectrum payment period of telecom operators to 16 years from the present 10 years will provide a cash flow relief of more than Rs 55,500 crore till 2025-26.

By: | New Delhi | Published: October 20, 2017 6:18 AM
 BPM, business process management, BPM industry, drastic shift in new recruits, new recruits, BPM industry new recruits According to an official source, the present deferred payment liability is around Rs 2.90 lakh crore spread over 12 years including the current fiscal. (Image: Reuters)

The recommendation made by the inter-ministerial group (IMG) for increasing the deferred spectrum payment period of telecom operators to 16 years from the present 10 years will provide a cash flow relief of more than Rs 55,500 crore till 2025-26. According to an official source, the present deferred payment liability is around Rs 2.90 lakh crore spread over 12 years including the current fiscal. Though with the proposed restructuring this liability will become Rs 3.83 lakh crore, but it will be spread over 18 years, and will increase the cash flow by more than Rs 55,500 crore over the next 9 years. According to IMG calculations, another top official said, telecom operators under the present mechanism have to pay Rs  7,647 crore in FY18, but with the 16 year option they will have to pay Rs 5,764 crore, which lowers the amount by around Rs 1,883 crore. Hence providing some cash flow relief. “Similarly, in FY19 the relief will be to the tune of Rs 4,580 crore. As the original amount of Rs 19,802 crore will get reduced to Rs 15,222 crore and likewise in the third year (FY20) this cash flow relief will be even higher at Rs 7,154 crore,” he added.

The recommendations by the IMG have been approved by the Telecom Commission and will now be placed before the Union Cabinet for approval by next month. Currently, telecom operators, who have acquired spectrum through auction, have to pay 33% of the total amount for over 1 Ghz bands (1800 Mhz, 2100 Mhz, 2300 Mhz and 2500 Mhz), while the payment in the case of sub-1 Ghz bands (800 Mhz and 900 Mhz) it is 25%. The balance is paid over 10 equal annual instalments plus a 2 year moratorium.

This was followed for spectrum auctions in 2012, 2013, 2014 and 2015. But for the October 2016 auction, the initial upfront payment was made 50% for over 1 Ghz bands, while rest of the conditions were kept the same. IMG while considering the industry demand for extending deferred payment from 10 years to 16 years, said that bringing the instalment timeline close to the expiry date could pose a risk to government’s dues in case there are defaults towards the end period, a source said.

Another issue was that spectrum won through auction is allocated for a period of 20 years and it is put for re-auction around 18 months in advance, hence it was felt that there was no need to extend the moratorium period from the present 2 years, he added. Conforming the development, a top official said, “Keeping all this in view, the IMG raised the deferred payment period to 16 years with a 2 year moratorium. With this now spectrum won in 2012 and 2013 will have 14 installments, those in 2014 will have 15 instalment and the winners in 2015 and 2016 will have 16 instalments as their payment period is yet to begin. This will be offered to operators as a one-time option”.

  1. V
    VC
    Oct 20, 2017 at 1:10 pm
    It will be inappropriate to say operators were dictating market before jio launch as cellular pricing has been lowest in india. Of course if companies have been making profit despite low price, then it was a win win situation. So far jio has not introduced any price efficiency or correction, it just made everything free. We should be happy that some big operators are still fighting and demanding help for survival, pls take note that many other operators are not even asking for help, they are just shutting shops. If the balance operators also shut shops then that will be the beginning of dictatorship era.
    Reply
    1. A
      Apte
      Oct 20, 2017 at 8:34 am
      1. It is good that inter-ministerial group or IMG has recommended to the Union government to allow more time for spectrum payment. This is supposed to be in interest of the telecom sector which is facing tough times after entry of R Jio. But is it not true that overall environment in the telecom industry has become very compe ive? 2. Truth is that three telecom companies, namely (a) Bharti Airtel (b) Vodafone (c) Idea Cellular, did not predict impact of compe ion from R-Jio. Impact is now felt by them in the form of revenue fall and hence they are claiming that whole telecom industry is stressed (on account of heavy debt) and therefore the government must come to their rescue. Let us also not forget that till the entry of R Jio in the telecom services market these three companies were almost dictating terms to customers. Hence I wish to know this: Would customers benefit from government relief to telecom companies? Central govt. must take steps to protect interests of customers.
      Reply
      1. V
        VC
        Oct 20, 2017 at 1:11 pm
        It will be inappropriate to say operators were dictating market before jio launch as cellular pricing has been lowest in india. Of course if companies have been making profit despite low price, then it was a win win situation. So far jio has not introduced any price efficiency or correction, it just made everything free. We should be happy that some big operators are still fighting and demanding help for survival, pls take note that many other operators are not even asking for help, they are just shutting shops. If the balance operators also shut shops then that will be the beginning of dictatorship era.
        Reply

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