Telecom SOS: Cabinet may take call on telecom relief package today

By: |
September 08, 2021 4:30 AM

Though financially-troubled Vodafone Idea has been at the forefront of demanding a relief package, sources said that it would not be tailor-made for any specific company but would be for the entire sector.

The reduction in the licence fee by two percentage points would provide a relief of around Rs 3,000 crore annually to the operators.The reduction in the licence fee by two percentage points would provide a relief of around Rs 3,000 crore annually to the operators.

The Union Cabinet is expected to take up the department of telecommunications’ (DoT’s) proposal for offering a relief package to the telecom industry at its meeting on Wednesday, official sources said. Though financially-troubled Vodafone Idea (VIL) has been at the forefront of demanding a relief package, sources said that it would not be tailor-made for any specific company but would be for the entire sector.

Still, any relief package at this point of time would benefit VIL the most. It would also protect government’s revenues and exposure of banks to the company. Of VIL’s net debt of Rs 1.8 lakh crore, government dues in the form of deferred spectrum payment (Rs 96,300 crore) and AGR dues (Rs 61,000 crore) come to around Rs 1.57 lakh crore.

Though the exact components of the proposed relief package is not known, the likelihood is that it would comprise reduction in licence fees, spectrum usage charges, clearer definition of adjusted gross revenue and extension of moratorium on deferred spectrum installment by another two years. Liberalisation of foreign direct investment norms from a security angle and doing away with the need of furnishing bank guarantees may also be on the cards.

Accordingly, the package may reduce the revenue share licence fee to 6% of AGR of the operators from the current 8%. This may be done by reducing the 5% universal service obligation levy by two percentage points. Since the Telecom Regulatory Authority of India (Trai) had given its recommendations to this effect in January 2015, there would be no need to once again seek the regulator’s views on the matter.

The reduction in the licence fee by two percentage points would provide a relief of around Rs 3,000 crore annually to the operators.

The second aspect which the proposed package may address is the issue of AGR prospectively. The government can’t do anything regarding the past AGR dues as the Supreme Court has ruled on it and also prescribed the mode and tenure of payment, but going ahead the government wants to settle the issue of calculation of AGR – what telecom revenues have to be part of it and what revenues of operators’ can be kept out of it. Here also the Trai has given recommendations in the past, so there would be no need to once again seek its views.

The third aspect may be doing away with the bank guarantees which the operators have to furnish to the DoT for their AGR and deferred spectrum installments. For financially healthy operators, furnishing bank guarantees is not a problem but for a financially troubled operator like Vodafone Idea, getting bank guarantees at this point of time is a problem. The view in the government is that the provision for furnishing bank guarantees can be done away with.

The fourth component of the package could be extending the moratorium on deferred spectrum installments. The government had in November 2019 provided a two-year moratorium on such payments – for FY21 and FY22 – which would be further extended. However, whether the extension would be for one more year or two is still not decided. The two-year extension had given a cash flow relief of around Rs 42,000 crore to the operators.

The government in-principle feels that there should be at least three private telecom players in the market for healthy competition but no specific benefit will be given to any particular company like Vodafone Idea. “We want a healthy, vibrant telecom sector and if some issues need to be sorted out, the government will do that. But no preference will be given to any particular company,” said an official.

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