Telco package at Cabinet today

The Union Cabinet is likely to discuss a relief package for the financially stressed telecom sector on Wednesday, according to sources in the government.

As part of the package, there could be some relaxation on payment of levies to the government including a one-year moratorium on spectrum installment due in April 2022. Among other things, the Centre has held several rounds of discussions on encouraging telecom companies to monetise their assets via INVIT and REIT instruments, an official at the Department of Telecommunications (DOT) said. The idea is to back telcos with sovereign assurance while they get to tap international investors. It could not be confirmed if such a proposal would come up before the Cabinet.

The Cabinet meeting is likely to take up some other proposals including those related to textile PLI (production-linked incentive) scheme and minimum support price of rabi crop.

On monetizing of assets, the DOT official said the government could issue letter of comfort to the telecom service providers to ease the process of getting funding from global investors.

For instance, cash-starved Vodafone Idea has been unable to raise adequate funds due to investor concerns. In such a case, Dot’s letter

of comfort could help. "Since tower assets can be treated either way as real estate or infrastructure, the companies can tap these routes (INVIT and REIT) to raise funds. The letter of comfort will act as an assurance for investors that their money is safe in the company," an official in the know told Business Standard.

The move, if approved, would apply to all telecom firms but would benefit Vodafone Idea immediately.

Following the buzz around a telecom relief package, shares of Vodafone Idea rose 14.48 per cent to ~8.30 on the BSE on Tuesday.

The practice of issuing letters of comfort was started mainly for Bharat Sanchar Nigam and Mahanagar Telephone Nigam to help them secure funding from banks.

Explaining the other measures that could be considered, an official said the licence fee is paid in four quarterly installments, which the department may allow companies to pay annually.

This may give a breather to some telecom firms in reducing their debt burden through the coming quarters.

But the government also wants the Uk-based parent company to infuse capital into Vodafone Idea to keep the company afloat. The group has resisted investing in the company, while maintaining it wouldn’t throw good money after bad.

The government's effort in preparing a telecom package is to ensure that the telecom sector does not become a duopoly.