The Union Cabinet on Wednesday granted its approval for the relief package for the debt-laden telecom sector, as proposed by the Department of Telecommunications following clearance from the inter-ministerial Telecom Commission. As an effect of the Cabinet’s nod, telecom companies will get more time to pay for the spectrum it has bought in earlier auctions.
The relaxed norms also include the ones for spectrum holding limit as recommended by the Telecom Regulatory Authority of India (Trai) and the Telecom Commission. The relief package was originally recommended by a special Inter Ministerial Group (IMG) created to suggest measures to ease the financial burden on telecom operators.
“With the restructuring of the deferred payment liability, the cash flow for the telecom service providers will increase in the immediate timeframe providing them some relief. Revising the limit for the spectrum cap holding will facilitate consolidation of telecom licensees and may encourage the participation in the future auction,” the government said in an official statement. Currently, the estimated debt in the sector is around Rs 4.6 lakh crore.
The IMG, in its recommendations submitted last year, had suggested 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 DoT and the balance, after a two-year moratorium, is paid out every year — 10 instalments in all.
“Profitability as well as reduction of debt levels will be further boosted by the Government allowing restructuring of Deferred Payment Liabilities for spectrum,” said Niren Patel, partner, Khaitan & Co.
The Telecom Commission 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 airwave holding in efficient sub-1 GHz bands.
“The telecom operators will now be able to trade in excess (subject to the prescribed time limit) as well as the current spectrum held by them with other telecom operators depending upon their current spectrum holdings. Each telecom operator has certain core circles that generates bulk of its revenues and this would enable them to strategically evaluate the need to either reduce their circle-wise businesses or close them entirely depending upon profitability and monetize their spectrum in underperforming circles,” Patel said. Over a period of several months last year, the IMG had held eight meetings.