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The reforms in the telecom sector announced by the government are expected to boost 4G proliferation, infuse liquidity and create an enabling environment for investment in 5G networks, according to the Economic Survey.
In September 2021, the Government announced a series of structural and procedural reforms, to bail out the ailing and debt laden telecom sector. These reforms included rationalisation of the definition of Adjusted Gross Revenue, to exclude non telecom revenue in the future, as well as a 4-year moratorium on spectrum and AGR dues that telcos could avail to.
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The collaboration will focus on areas such as aerial and space communication, holographic beamforming, cybersecurity and microelectronics photonics“In the backdrop of the outstanding performance of the telecom sector in meeting Covid-19 challenges and with huge surge in data consumption due to online education, work from home, interpersonal connect through social media, virtual meetings etc., the reform measures will further boost the proliferation and penetration of broadband and telecom connectivity. The reforms are also expected to boost 4G proliferation, infuse liquidity and create an enabling environment for investment in 5G networks,” noted the Survey.
Challenges faced
The Survey was, however, silent on the challenges faced by the sector including the growing debt pile. So far, telcos Bharti Airtel and Vodafone Idea have availed the 4-year moratorium option on spectrum and AGR dues while Reliance Jio the largest telco by market share has chosen to opt out. Vodafone Idea is also going to avail the conversion of debt to equity option in the telecom reforms package, which means that in 4 years the government could be the largest shareholder in Vodafone Idea with a 36 per cent stake.
While experts have continued to maintain that the possibility of a Bharti-Jio duopoly looms in the future, especially as Vi resorts to debt to equity conversion option, the Survey remains silent on this issue and concerns around the huge debt pile on the operators. According to a report by ICRA, the debt pile on telcos will rise to nearly ₹4.7-lakh crore this year.
In order to address liquidity requirements for telcos, the Government provided sops including a moratorium or deferment of up to four years in annual payments of dues arising out of the AGR judgment, deferment on due payments of spectrum purchased in past auctions (excluding the auction of 2021) for up to four years with NPV protected at the interest rate stipulated in the respective auctions. The government also provided an option to telcos to pay the principal and the interest amount arising due to the moratorium of payment by way of equity.
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