Quantify total relief required by sector: Telecom Comm to DoT

Telecom Commission, the highest policy-making body of the Department of Telecommunications (DoT), has asked the latter to quantify total relief required by the telecom sector.

Telecom Commission in its last meeting on September 8 considered the report by an Inter-Ministerial Group (IMG) on the financial stress in the telecom sector.

This has come in the wake of existing operators expressing displeasure over IMG recommending just few measures as relief for the sector by saying mere extending of spectrum repayment may not be enough to ease out the stress.

IMG had recommended that the deferred payment schedule for spectrum should be increased to 16 years from 10 years and replacement of the prime lending rate (PLR) with the marginal cost of fund-based lending rate (MCLR).

However, Telecom Commission also asked the department to work out two more options of 12 and 14 year installments containing sub-options of front ending the cash flow relief to the telecom service providers, according to the minutes of meeting accessed by DNA Money.

IMG was constituted in May to"examine systemic issues affecting viability and repayment capacity in the telecom sector and furnish recommendations for resolution of stressed assets".

The total relief as well new options for deferred payment liability for spectrum repayment will have to be calculated by DoT, which will be submitted again to the Telecom Commission for consideration.

The telecom industry is sitting on a huge debt of about Rs 4.5 lakh crore, out of which a major portion is towards deferred spectrum payment to the government.

"The interest rate charged on delayed payments should continue to act as a disincentive to the companies," Telecom Commission noted while expressing concerns over replacement of PLR with MCLR for calculating interest paid to be paid by telcos on licence fee and spectrum usage charges.

"A note may be submitted to the Commission on this aspect," the Commission said.

IMG was set up in May to suggest ways for the telecom industry amidst financial stress and high debt. The competition in the industry also increased severely with the entry of Reliance Jio. Due to this the existing players – Bharti Airtel, Vodafone India and Idea Cellular – have been demanding some relief package/financial incentives.

Currently, a portion of spectrum auction amount is taken as upfront payment by DoT and the balance after a two-year moratorium is paid out every year in 10 installments.

On amendments to spectrum trading, Telecom Commission said the DoT can obtain a legal opinion on "whether such an amendment should be made applicable retrospectively or prospectively". It has asked DoT to resubmit it for consideration.

Vodafone Group CEO Vittorio Colao had written to the telecom minister Manoj Sinha expressing hope that IMG will recommend "a reduction in the interest rates for deferred spectrum payments to 6.25% in line with the improved macroeconomic trends and an increase in the period of payment for spectrum".

Operators had demanded reduction in licence fee and spectrum usage charges but that was not recommended by IMG.