The exercise will help telecom companies in meeting their mortgage repayment schedules, says IBA chief executive
As the telecom sector reels under spectrum-related liabilities of around Rs 5.80 lakh crore, Indian Banks Association (IBA) has urged the government to refund excess upfront payment and revoke deferred liabilities of operators undergoing financial restructuring. The exercise will help these companies in meeting their mortgage repayment schedules, thereby preventing the loans from turning into non performing assets (NPAs), chief executive of IBA V G Kannan said in a letter to Department of Telecom (DoT) secretary Aruna Sundararajan, which was seen by FE. IBA without naming any company said that some telecom operators are, at present, undergoing financial restructuring under various schemes of the RBI. These operators have already proposed to optimise their assets as well as monetise non-core assets including spectrum to reduce debt and improve balance sheets.
“Considering most mobile operators have borrowed from public sector banks, the government is requested to refund any excess upfront payment for the residual spectrum being surrendered from upfront payment made in totality during the purchase of spectrum as well as rescind all future deferred spectrum payment liabilities associated with such spectrum,” IBA chief suggested. “The money will be used for repaying the banks, which in turn will prevent loans from turning into NPAs,” IBA said adding that a similar facility had been accorded in the past to state-run telecom operators, BSNL and MTNL. It also urged the government to return bank guarantees submitted by the telecom operators as it will help ‘free up critical working capital’ for these operators.
Stating that reduced revenues and Ebitda margins of the industry are not ‘sufficient’ to meet the existing debt obligations and deferred payment commitment for spectrum, IBA said that the sector continues to experience ‘severe stress’ and witnessed a decline in revenue and Ebitda during FY17 for the first time in its history. The association said that total liabilities of the companies stand at around Rs 7.75 lakh crore as on March 31, 2017, of which bank borrowings and liabilities for spectrum-related payment to DoT amounts to Rs 5.80 lakh crore alone. The industry’s adjusted gross revenue (AGR) which was Rs 53,383 crore during Q1 FY17 has plummeted to Rs 39,777 crore during Q1 FY18. It welcomed the measures recommended by the inter ministerial group (IMG) to help bail out the cash-strapped operators such as increasing the repayment period for deferred spectrum liabilities from 10 to 16 years and shifting from PLR to MCLR.