Press "Enter" to skip to content

Govt bails out telcos with 4-year gap in spectrum, AGR payouts – Times of India

NEW DELHI: The Union Cabinet on Wednesday cleared a reform-oriented bailout package for the beleaguered telecom industry – freeing up cash for the financially stretched companies by throwing in a four-year moratorium on spectrum and AGR payments, while also slashing charges and offering a lenient definition of revenue recognition to hasten the transition towards 5G.
The move, which was anticipated after Vodafone Idea appeared headed towards bankruptcy, will benefit all players, including Bharti Airtel and Reliance Jio. It had been in the works for the past few months but was expedited as then Vodafone Idea chairman Kumar Mangalam Birla virtually threw in the towel amid mounting losses and heavy debt. was the first to report on the series of relief measures.
Telecom minister Ashwini Vaishnaw said the “structural reforms” for the sector were revenue neutral – since interest will be charged post-moratorium – and have been approved to ensure sufficient competition in the sector.
The government decided to remove non-telecom revenues from the AGR definition, which will save tax outgo on spectrum usage charge and licence fee in the future. It also cut the bank guarantee mandate against licence fee and other similar charges by 80% and said there will be no requirement for multiple bank guarantees in different service areas.
The interest charged for delayed payments was also reduced, and penalties were removed. The measures are likely to leave sufficient cash in the hands of the industry to tide over their financial woes.
The government has also kept the option to convert a portion of the interest burden into equity if the need arises at the end of the moratorium .
And, to encourage the companies to move towards 5G, the government announced a series of positives which should make the industry migrate to the next-gen telecom technology. These include increasing the tenure of spectrum holdings by a significant 10 years — raising it to 30 years from the existing 20 years.
Surrender of spectrum will be permitted after 10 years for spectrum acquired in the future, while the government also said that it will not charge any SUC in the future. It also further liberalised foreign investment inflows in the sector, allowing 100% FDI under the automatic route.
However, it remained cautious over investments coming in from China and countries that share a land border with India, saying they would be scrutinised.