Telecom firms likely to get more time for spectrum payments
Raise time limit for payments to 16 years: IMG
NEW DELHI: India’s telcos, many burdened by debt and payments to the government, and facing competition from a well-heeled and aggressive new entrant, may have something to cheer about.
An inter-ministerial group (IMG), studying their problems, has completed its report and recommended stretching the duration of spectrum payments telcos have to make to the government to 16 years and also lowering the interest rate on interest payments, according to a person familiar with the matter who asked not to be identified.
India’s telcos had debt of ₹4.85 lakh crore on their books at the end of December, and owe the government ₹3 lakh crore over the next eight years. But they also face intense competition, and the average revenue per user for most telcos has fallen since Mukesh Ambani-controlled Reliance Jio started commercial operations in September.
As profits fell, concern about the ability of the telcos to service their debt rose. On April 4, RBI issued an advisory to banks to review their assets to telcos.
Meanwhile, telcos started lobbying for a bailout.
Among their demands were: an increase in the payment period for spectrum to 18 years (a two-year moratorium and 16 years), against the current 10 (a two-year moratorium and eight years), a shift to the marginal cost of funds-based lending rate against the prime lending rate (their spectrum repayments also have an interest component that this change will reduce), a cut in the spectrum usage charge, and removing the cap on spectrum a telco can hold in an assigned area.
IMG has agreed to the first two, is not sure about the third because things seem to be looking up for the business, and wants the telecom regulator to look into the cap on spectrum which is currently 50% in an assigned area (or circle), according to the person cited in the first instance.
The recommendations of the IMG will now be reviewed by the Telecom Commission and will then be cleared by the cabinet.
IMG has not put a number to the quantum of benefits telcos can hope to receive, the person cited in the first instance said.
Separately, Reliance Jio on the one side, and Bharti Airtel, Vodafone India, and Idea Cellular on the other, have been scrapping over the interconnection regime the regulator is considering. Sunil Mittal, chairman of Bharti, and Kumar Mangalam Birla, chairman of Idea Cellular, have separately written to the telecom regulator arguing against any change to the current regime where telcos compensate each other (through an interconnection charge) for calls that originate in one network but end in another to one where there is no compensation. They argue that this will favour Jio because more calls will be made out of that telco’s network than to it.
Vodafone Group Plc CEO Vittorio Colao, had recently written to telecom minister Manoj Sinha expressing hope that the IMG would recommend “a reduction in the interest rates for deferred spectrum payments to 6.25% in line with the improved macroeconomic trends”.