Govt heeds telecom sector’s call: Major licence fee, AGR relief expected on September 8

S Ronendra Singh New Delhi | Updated on September 07, 2021

Cabinet seen re-defining AGR, giving moratorium on spectrum instalment payment

In a major relief package for the telecom sector, the Cabinet is likely to consider rationalisation of the telecom licence fee from 8 per cent to 6 per cent on Wednesday.

By another decision, the Cabinet may change the definition of the Average Gross Revenue (AGR) that the industry has been demanding for long so that they need not pay more interest. It may now exclude non-telecom items from the definition of AGR, sources in the know told BusinessLine.

If the AGR is taken out, the companies can gain from the non-telecom revenue in their balance-sheets every month.

Government sources said a meeting was held internally between members of the Digital Communications Commission (DCC) on this and the recommendation has been sent for Cabinet approval.

Asked about two years’ moratorium on payment of deferred spectrum instalments, as done earlier too, the sources said that could also happen, but did not give details.

In November 2019, the government had allowed two-year moratorium on the deferred payments for financial years 2021 and 2022, which could be extended by the Cabinet on Wednesday.

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.

Likely domino effect

According to analysts, also, VIL’s financial position right now needs immediate attention as it is likely to impact other stakeholders and impact 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.

Per an ICRA note, “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.

“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,” he said.

This apart, other measures like reduction in the interest rate on DoT dues, increasing the spectrum allotment tenure and introduction of floor tariffs can also aid the industry, he added.

Published on September 07, 2021

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