Cabinet nod to relief package for telecom sector
EASING NORMS Spectrum cap raised, payment period extended for telcos; changes expected to ease mergers, boost companies’ cash flows
NEWDELHI: The Union cabinet on Wednesday approved a relief package for the stressed telecom sector, easing spectrum holding caps and extending the payment period for spectrum dues to 16 years from 10 years.
While the change in spectrum caps is expected to ease mergers and acquisitions, allowing operators to settle their dues to the government over a longer time period will boost cash flows of operators.
The earnings of telecom operators, grappling with a heavy debt load, have come under further pressure after the entry of Reliance Jio Infocomm Ltd in September 2016. The Mukesh Ambani-controlled company first disrupted the sector through triggering free ultra-cheap services a wave of and data consolidation. later tariffs,
the The overall cabinet spectrum approved cap raising per operator in a telecom circle to 35% from the current 25%. It also scrapped a rule that restricted operators from holding more than 50% spectrum in a single band in a circle. The new norms have set a cap of 50% on the combined spectrum holding in the sub-1 GHz bands in a circle.
With this change, Vodafone India Ltd and Idea Cellular Ltd, which are set to merge their operations, will not have to surrender spectrum in seven circles where they would have otherwise breached the caps as a combined entity.
This also potentially allows Jio to buy the rest of the spectrum owned by Anil Ambani’s Reliance Communications Ltd (RCom), especially in the coveted 800 megahertz (MHz) band. RCom’s band have would If In circles. Jio breached under holding December, buy spectrum were the a majority norms, caps previous to in Jio buy the in it 800MHz said 11 would of all spectrum telecom the of it wireless include 2,100MHz in 122.4MHz assets bands. the of 800/900/1,800/ RCom, of 4G which spectrum are “The in easing line of with spectrum industry caps demands. and Idea This and will also help Reliance Vodafone Jio in acquiring spectrum from RCom. Extending the time period for spectrum payments is good from cash-flow perspective but it does not fix the real issues of the industry which has to pay almost 30% of its revenues as levies to the government,” said Rajan Mathews, director gen- eral, Cellular of India. Operators Association “The department of telecommunications had indicated that the new telecom policy 2018 would be the means to address this but delays are impacting the sector,” he added. Telecom operators will also get a one-time opportunity to opt for 16 instalments for spectrum dues and “the increased instalment is based upon the principle that the net present value of the payment due is protected as per respective notice inviting application for auction of spectrum from 2012. The total amount received will be higher by ₹74,446.01 crore till 2034-35”, an official statement said. Emails sent to Bharti Airtel Ltd, Jio, Idea Cellular and Vodafone India were unanswered till press time.