Telcos may get spectrum payment leeway
IMG concludes report on telecom woes, suggests no cuts in licence fee
The inter-ministerial group (IMG), formed to address the financial stress of telecom sector, has submitted its report on measures including extension of the timeframe for spectrum payments and change in interest rates. However, it has not recommended any cut in licence fee or spectrum usage charges (SUC).
The IMG has recommended extending the deferred payment schedule to 16 years and converting the PLR (prime lending rate) to the MCLR (marginal cost of funds-based lending rate) as the primary relief measures for financially stressed telcos, it is learnt.
The recommendations, industry players say, will help in the long run as these will have a bearing on future cash flows. But the proposals don’t address the current problems that have caused financial stress in the sector, they said.
It is disappointing that the IMG did not offer any relief on the licence fee and spectrum usage charges, an industry source said. Telcos were looking for reduction in USOF (Universal Service Obligation Fund) levy, which is currently at 5 per cent of AGR (adjusted gross revenue).
“We appreciate the government for increasing the deferred payment schedule and change on interest rates, but the fundamental issues remain,” an industry representative said. The government is still protecting its revenue and no change in USOF levy is disappointing, he added.
The industry has been demanding that since telecom operators have already covered 90-95 per cent of the country in providing connectivity, the USOF levy should be waived or at least reduced. The licence fee of 8 per cent includes 5 per cent USOF levy. Also, the IMG has not touched the issue of interconnect usage charges, saying that the Telecom Regulatory Authority of India would take a call on the matter.
The longer duration of deferred spectrum payments, as recommended by IMG, could increase the cash flow of telecom operators by ~55,000 crore. Due to the change of PLR to MCLR, cash flow benefits of ~20,000 could accrue to telcos.
Rajan S Mathews, director general, Cellular Operators Association of India, told Business Standard, “We are grateful to the government for addressing the debt issue of the industry, but the systemic challenges for the industry still remain. We are disappointed that the fundamental problem of licence fee and spectrum usage charges in not addressed.”
The IMG — comprising senior officials from ministries of finance and communications— was constituted in mid-May to “examine systemic issues affecting viability and repayment capacity in the telecom sector and furnish recommendations for resolution of stressed assets”.
The recommendations of the IMG will be placed before the Telecom Commission, which will meet next on September 8. The IMG’s proposals will also require Cabinet nod.
The outstanding debt in the industry is pegged at ~4.5 lakh crore, incurred mainly on account of payments for spectrum, and other levies.