MODI CABINET GIVES BIG RELIEF TO STRUGGLING MOBILE OPERATORS

By Sandeep Joshi

NEW DELHI, NOVEMBER 20, 2019: In a major relief to financially-strapped telecom operators, the Union Cabinet today cleared a two-year moratorium on payments of spectrum charges, which will give immediate relief of more than ₹42,000 crore to India’s top three mobile operators. Significantly, India’s two leading mobile operators — Bharti Airtel and Vodafone-Idea — are facing high debt and huge losses post the entry of Reliance Jio.

Announcing this to the media after the Cabinet meeting, Finance Minister Nirmala Sitharaman said: “In view of the current financial stress faced by major telecom service providers and in pursuant of the recommendations by the Committee of Secretaries (CoS), it is decided to defer receipts of spectrum auction instalments due from the TSPs (telecom service providers) for the years 2020-21 and 2021-2022”. She said the deferred amounts would need to be equally spread over the remaining installments to be paid by the carriers, without any increase in any existing time period specified for making the payments. “The interest as stipulated while auctioning the concerned spectrum will, however, be charged so the NPV (net present value) remains intact,” she said.

The Government announcement means that the three mobile operators — Reliance Jio, Bharti Airtel and Vodafone-Idea —  will make the next spectrum payment to the government only in fiscal 2022-23. Telecom companies opting for the two-year deferred payment must furnish revised bank guarantees for the installments to be paid starting 2022-23. While Vodafone Idea will get time for making payment to the tune of Rs 23,920 crore, Airtel of Rs 11,746 crore and Jio Rs 6,670 crore to the government.

The decision for deferring spectrum payment instalments will be implemented within a fortnight, the government said in a statement. The Department of Telecommunication will give an option to the telecom service providers to defer the payment of the spectrum auction instalments due for 2020-21 & 2021-22, either for one or both years, it added. Deferment of spectrum auction instalments will ease the cash outflow of the stressed companies and facilitate payment of statutory liabilities and interest on bank loans, it said, adding that continued operation by the operators would give a fillip to employment and economic growth.

However, the government has shown no inclination to give relief to Vodafone Idea and Airtel on the payment of Rs 89,000 crore in licence fees, spectrum usage charge, penalties and interest after a recent Supreme Court ruling expanded the definition of adjusted gross revenue (AGR). The AGR dues have to be paid in less than three months.

Welcoming the government move, Cellular Operators Association of India (COAI) DG Rajan Mathews said: “We’ve come to expect that the government moves incrementally, so we really appreciate that the government has considered one of our early requests … it certainly helps with the cash flow situation. I hope the panel of secretaries will continue to look at the other requests that the industry had made, including reduction in levies and taxes.


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