Companies

Cabinet defers decision on telecom relief package

Our Bureau New Delhi | Updated on September 08, 2021

FILE PHOTO   -  Prashant Nakwe

A meeting was held internally between members of the Digital Communications Commission, said sources

The Cabinet on Wednesday has deferred the decision on providing some relief package to the telecom sector, senior government officials said.

It was expected to consider some relief measures in the form of rationalisation of telecom licence fee and changing the definition of Average Gross Revenue (AGR) that the industry has been demanding for long so that they need not pay more interest, and also exclude non-telecom items from the definition of AGR.

The sources, however, declined to give details on why the proposal was not discussed, and whether the same can be taken up next week. Anurag Thakur, Minister of Sports, Youth Affairs and Information and Broadcasting said that there was no call taken anything related to telecom relief. “There was nothing like that,” he said.

According to government sources, a meeting was held internally between members of the Digital Communications Commission (DCC) on the relief package for the sector and the recommendation had been sent to the Cabinet.

Moratorium

In November 2019, the government had allowed two-year moratorium on the deferred payments for financial years 2021 and 2022, which could have been extended by the Cabinet, as per the sources.

A few months ago, ailing Vodafone-Idea (VIL) had also requested the government to grant one-year moratorium over its spectrum instalment of around ₹8,200 crore due next April. It said otherwise, the company would not have enough funds for the AGR payment due in March 2022.

According to analysts, VIL’s financial position right now needs immediate attention as it is likely to impact other stakeholders and the industry structure too. The financial position of the company has been deteriorating with losses and debt rising to around ₹1.8-lakh crore now.

ICRA study

As per a latest ICRA study, VIL has been under financial stress, as reflected by mounting losses and burgeoning debt levels, which is likely to impact its financial lenders as well as government, apart from having a bearing on its employees, its subscribers and associated industries, most prominently towers.

According to Ankit Jain, Sector Head and Assistant Vice-President, ICRA, “Given the current situation and sizeable obligations in the near term for VIL, material external support (primarily from government) can act as a relief measure.”

He added, “The most effective relief can come in the form of extension of moratorium on spectrum dues beyond FY2022, which can result in deferment of dues payable in FY2023 of ₹32,000 crore for the industry of which ₹16,000 crore is for VIL. Moreover, a reduction in the levies paid by telcos, namely, licence fee and spectrum usage charges can also lift the EBITDA. A one per cent reduction in levies leads to an annual saving of ₹1,600 crore for the industry.”

Teleco firms’ shares

Shares of VIL were up 4 per cent while Bharti Airtel hit record highs during the morning trade on Wednesday as the Cabinet was expected to take up the Department of Telecommunications’ (DoT’s) proposal for offering a relief package to the telecom industry.

However, VIL’s shares closed at ₹8.07 apiece, down 2.54 per cent from the previous close in the BSE. Airtel’s shares were also down 0.43 per cent at ₹667.80 a piece.

Published on September 08, 2021

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