4-year moratorium on spectrum, AGR dues tops telecom bailout

The government has finally come to the rescue of the beleaguered telecom industry and announced a mega relief-cum-reform package. The Union Cabinet-cleared package includes a four-year moratorium on spectrum and Average Gross Revenue (AGR) dues, as also a liberalised investment regime that allows 100 per cent foreign direct investment (from 49 per cent now) through the automatic route, except from China and bordering countries.

The much-awaited package had been in the works for the past few months especially after Vodafone Idea (VIL) came to the brink of collapse as losses mounted and debt piled up to around ₹1.8-lakh crore.

The government will have an option to convert any amount pertaining to the deferred payment due into equity at the end of the moratorium/deferment period.

The government has also done away with the Spectrum Usage Charge (SUC), a substantial levy on telecom service providers (TSPs), from future auctions and increased the tenure of spectrum of holdings from the existing 20 years to 30 years. This is valid only for future spectrum auctions.

It has also changed the definition of AGR to remove non-telecom revenues, which will help reduce the TSPs’ payment burden. The government has ensured that the stressed TSPs have sufficient cash-in-hand and said that for auctions henceforth, no bank guarantees will be required to secure instalment payments.

Revenue neutral for govt

Telecom Minister Ashwini Vaishnaw said that “The telecom relief package is revenue neutral for the government. These are expected to protect and generate employment opportunities, promote healthy competition, protect interests of consumers, infuse liquidity, encourage investment and reduce the regulatory burden on TSPs.”

Reacting to the Cabinet decisions, Kumar Mangalam Birla, former Chairman of Vodafone Idea, said, “These reforms demonstrate the government’s firm commitment to ensuring healthy growth of the industry.”

New beginning: Voda CEO

Nick Read, CEO, Vodafone Group, who had recently met the Telecom Minister, said the decisions will mark the beginning of a ‘new era of India’s digital ambitions and for VIL’s continued contribution to creating an inclusive and sustainable digital society to the benefit of all citizens’.

Sunil Bharti Mittal, Chairman, Bharti Airtel, said: “What lies ahead is a once in a lifetime opportunity to build the digital infrastructure that is a catalyst for the digital aspirations of over one billion Indians.”

Mukesh Ambani, Chairman, Reliance Jio Infocomm, said that “These are timely steps towards strengthening India’s telecom sector... The government’s telecom sector reforms will encourage us to bring newer and greater benefits to our customers...”

“These steps would go a long way in relieving the financial stress the sector is facing, boosting investments, encouraging healthy competition and in offering choice to customers. The announcement is aligned with the telecom industry’s long-standing asks,” Cellular Operators Association of India said.