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  1. IMG report: Centre may have rejected some demands, but telcos could get cash flow relief

IMG report: Centre may have rejected some demands, but telcos could get cash flow relief

Telecom operators could get some relief though a few of their demands seem to have been rejected by the government.

By: | Published: July 25, 2017 6:51 AM
IMG report, central government on telcos, central government on telecom operators, telcos, telcos in India, MCLR, GST, Reliance Jio, Bharti Airtel Deferred payment tenure to be extended; interest may be cut from PLR of 12% to MCLR of 8%; other demands rejected. (Image: Reuters)

Telecom operators could get some relief though a few of their demands seem to have been rejected by the government. According to sources, at a recent meeting between the finance ministry and the department of telecommunications, draft recommendations of the government-appointed inter-ministerial group’s (IMG) were discussed wherein it was decided to provide some cash flow relief to the operators. The good news for the operators is that their deferred payment period for spectrum is likely to be extended to 16 years from the 10 now. Currently, after paying upfront either 25% or 50% (depending on spectrum band) of the total bid amount, operators get a two-year moratorium, after which they pay the balance in 10 equal instalments spread over 10 years.

Another relief measure which may come their way is that interest payment on deferred payments may be cut from PLR of 12% to MCLR of 8%. Both these measures would give cash flow relief to the operators. However, their demand for reduction in licence fee, spectrum usage charge and GST of 18% on telecom services have been rejected. On the contentious issue of mobile termination rates, where the incumbents and Reliance Jio are on opposite side, the government will go as per the decision of the Telecom Regulatory Authority of India, which is currently conducting a review of the current charges, which is 14 paise per minute. While the incumbents want this to be hiked to 30-35 paise per minute to reflect full cost, Jio wants this to be made zero under what is called bill and keep.
Sources said the IMG report is likely to be finalised shortly after which it will be placed before the Telecom Commission.

FE had reported on June 29 that the IMG decisions are likely to be along these lines. Reducing licence fee and SUC were matters on which the entire industry — incumbents like Bharti Airtel, Vodafone and Idea Cellular as well as new entrant Reliance Jio — had presented a united picture before the IMG.

On licence fee, the entire industry had urged that it be reduced to around 1% of their adjusted gross revenue against 8% currently. On SUC, they had urged it be brought down to 1% of AGR for all spectrum bought in future auctions against 3% at present. The industry’s logic was that the present rates were fine till the time spectrum was being given on subscriber-linked criteria but now that spectrum is auctioned, the government should only charge for administrative costs which should not be more than 1% of their AGR.

On deferred payment, operators like Bharti had urged for increasing the moratorium to five years from the current two and number of installments to 15 from the current 10. Idea had urged that the number of instalments be increased to 20 to make it co-terminus with the validity of the licence period.

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On deferred payment, Jio’s was the lone voice that wanted this mechanism be done away with as it led to irrational bidding by operators. The telecom industry’s total debt stands at around Rs 4.60 lakh crore. It has bought spectrum since 2010 worth Rs 3.45 lakh crore for which an upfront payment of Rs 1.90 lakh crore has been made and the balance Rs 3.08 lakh crore needs to be paid up to 2028-29. If the deferred payment period is increased, this would get extended.

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