The government today cleared a relief package for the debt-ridden telecom sector, giving more time to operators to pay for the spectrum bought in auctions.
The government today cleared a relief package for the debt-ridden telecom sector, giving more time to operators to pay for the spectrum bought in auctions. It has also relaxed the spectrum holding limit for the telecom operators, according to an official spokesperson. The package was cleared by the Cabinet today based on the recommendations of the Inter Ministerial Group (IMG) on the telecom sector. The IMG was tasked last year to suggest policy reforms and strategic interventions for the troubled sector bruised by falling tariffs, eroding profitability, and mounting debt in the face of stiff competition from new entrant Reliance Jio.
The official said the Cabinet has approved the two key measures to facilitate investments and consolidation in the sector, facing Rs 4.6 lakh crore debt. These include restructuring of deferred payment liabilities of telecom service providers for spectrum and revision of limit of spectrum holding caps. These measures are expected to increase the cash flow for telecom operators immediately, providing them some relief, the official said. Moreover, revising the limit for spectrum holding will facilitate consolidation of telecom players and may encourage their participation in future auctions.
The IMG, in its recommendations submitted last year, had mooted the extension of time period for the payment of spectrum bought in auctions by operators to 16 years from the current 10 years. Currently, a portion of spectrum auction amount is taken as upfront payment by Department of Telecom(DoT) and the balance, after a two-year moratorium, is paid out every year — 10 instalments in all.
The Telecom Commission – which is the highest policy making body of the Telecom Department – had also approved sectoral regulator Trai’s recommendation that the ceiling on spectrum held by mobile operators within a particular band be removed. It had suggested 50 per cent cap on combined radiowave holding in efficient bands. The IMG had held eight meetings over a period of several months but in its recommendations, had stayed away from suggesting big-bang reforms.
Instead, its recommendations focused on easing the short-term pain points to give the sector time to rework its investments and business strategy. The Indian telecom industry, which is locked in an intense tariff war, owes a staggering Rs 4.6 lakh crore to various financial institutions and banks. At the same time, large operators have been flagging pressure on revenue and profitability, blaming the rock-bottom data tariffs and free offerings of newcomer Reliance Jio for deteriorating financial health of the sector.
Telecom operators have traded charges on multiple occasions, blaming each other for the sector’s financial difficulties. Reliance Jio accused incumbent operators of milking the sector using borrowed money while older players (Airtel, Vodafone and Idea) blamed free voice and data offering by the Mukesh Ambani firm for bleeding the sector.