IBA suggests measures to ease financial stress of telecom operators
NEWDELHI: Indian Banks Association (IBA) has sought to ease the financial stress on telecom companies by suggesting to the government that it refund operators any excess upfront payment made for surrendered spectrum and scrap deferred payment liabilities related to the airwaves.
“This money will be used for repaying the banks, which in turn prevent loans from turning into NPA,” IBA’S chief executive VG Kannan, said in a letter to telecom secretary Aruna Sundarajan on November 29.
Kannan cited similar arrangements being made for Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd as precedents for such provisions for the private telecom companies.
According to IBA estimates, the total liabilities of the telecom sector stood at ₹7.75 lakh crore as of March 31, of which bank borrowings and liabilities towards spectrum payment to the telecom department stood at ₹5.80 lakh crore.
Companies in the telecom sector have been battling pressure on margins and revenue streams after the entry of Reliance Jio in September last year, which after offering free services for almost seven months announced an intense tariff war by way of rock-bottom data prices.
The current stress in the sector has also forced beleaguered Reliance Communications Ltd to shut its 2G and 3G business and focus only on 4G. Rcom had in June managed to secure a seven-month standstill on servicing its debt. The debt repayment was contingent on its proposed merger with Aircel’s India wireless operations and stake sale in tower business to Brookfield Infrastructure.
After its merger with Aircel fell through, the company in October presented a fresh debt repayment plan to its creditors under which it aims to raise ₹27,000 crore through sale of assets including spectrum, real estate and towers.
“As per current norms, if an operator surrenders spectrum, the government does not owe it any money. Moreover, despite surrendering spectrum, it is still liable to pay all future instalments related to the spectrum purchase,” a regulatory officer at a telecom operator said.
As per current provisions, an operator can hold up to 25% of the total spectrum assigned across all bands and 50% within a given band in each of the service area.