The government appointed inter-ministerial group (IMG) on telecom on Tuesday almost finalised its recommendations with the consensus favouring only extension in the deferred payment period for spectrum bought in auctions from the current 10-year period to 16 years.
The government appointed inter-ministerial group (IMG) on telecom on Tuesday almost finalised its recommendations with the consensus favouring only extension in the deferred payment period for spectrum bought in auctions from the current 10-year period to 16 years. However, there won’t be any extension in the two-year moratorium operators get after paying a portion of the amount upfront. Sources said that the move would bring cash flow relief to the 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 amount would be paid over a longer tenure. The other measure on which the IMG reached a consensus was that if there is any delay in payments by operators of licence fee or spectrum usage charges, etc, the interest will be charged on the basis of MCLR instead of PLR.
Sources said that the IMG report is likely to be finalised within a week after which it will be placed before the Telecom Commission at its meeting on September 1. As indicated by an IMG official at the last meeting earlier this month, no major change in policy would be recommended by the IMG by way of reducing the licence fee or spectrum usage charge on which the entire industry was united in its presentation before the panel. Sources said that the members of the finance ministry in the panel were opposed to any such measure which impacts government revenues.
In FY17, total receipts for the government from telecom services, including spectrum auctions, was at Rs 78,715 crore. For the current fiscal since there is no auction scheduled, it has been estimated at a lower Rs 44,342 crore. With downward competitive pressure coming on tariffs with the advent of Reliance Jio even the revenue share licence fee which the operators pay to the government is on a downward trend on a quarter-on-quarter basis. Even a contentious issue like interconnect usage charge will not be touched by the IMG because it lies in the domain of the Telecom Regulatory Authority of India, which is already deliberating on the issue. At a later stage, the IMG had taken up the issue of liberalising the 50% spectrum circle-wise cap in a given band on operators because it was felt that it obstructs merger and acquisitions. However, finally it was felt that this is also a matter to be first dealt by Trai.
Currently, after paying upfront either 25% or 50% (depending on the spectrum band) of the total bid amount, operators get a two-year moratorium after which they pay the balance amount in 10 equal instalments over 10 years. This would get extended to 16 years with the net present value remaining intact. There’s sure to be some disappointment in the industry since 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, the industry 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 when 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 Airtel had urged for increasing the moratorium to five years from the current two and the number of instalments 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. On deferred payment, Jio was the lone operator that wanted that this mechanism be done away with as it led to irrational bidding by operators.