Govt may offer relief if telecom sector reaches consensus on stress
Telecom operators may not get any financial relief on spectrum-related dues unless the top three telcos—vodafone Idea Ltd, Bharti Airtel Ltd and Reliance Jio Infocomm Ltd—agree there is a financial stress in the industry, a government official said.
Last month, Vodafone Idea chairman Kumar Mangalam Birla met officials from the finance ministry and telecom department to discuss his company’s pending spectrum-related liabilities. He had also flagged concerns on the liquidity crunch in the sector.
This was followed by a letter from the Cellular Operators Association of India (COAI) to the telecom department seeking financial relief.
“The problem is that they are not able to come together as an industry and say there is stress. We could have initiated some action if they could come together. If one player is opposing everything, and two players are saying they want relief, then what will the government do?” the official cited above said on condition of anonymity. Under current rules, at the time of spectrum purchase, telcos need to pay the government some amount. Then, a two-year moratorium begins, after which the operator pays the rest over 16 years.
Vodafone Idea had sought increasing this period from 16 years to 18 years. But Reliance Jio has opposed this proposal, and hence there is no agree- ment among operators.
Vodafone Idea faces spectrum liabilities worth ₹3,000 crore due in March 2019 and an additional ₹12,000 crore due in mid-2019-20, Credit Suisse said in a note dated 22 November.
The telecom sector is witnessing a fierce battle after the entry of Reliance Jio in September 2016, which has brought down tariffs sharply. As a result of the year-long consolidation, only two other private firms are left— Bharti Airtel and the merged entity of Vodafone India and Idea Cellular. Vodafone Idea posted a ₹4,970 crore loss in September quarter, while Bharti Airtel posted a meagre ₹118 crore profit.
Meanwhile, the government has initiated action on the industry’s demand for reviewing import duties on telecom equipment. In October, it raised basic customs duty on telecom equipment including base stations and optical transport equipment from 10% to 20%.