Telecom firms to get more time to pay for spectrum

Ericsson for mobile Internet

Cabinet approves relief packages for the telecom sector

"These include restructuring the deferred payment liabilities of spectrum auction of telecom service providers and revising the limit of the cap for spectrum holding for telecom service providers", it said. The measures mean operators will be able to pay for spectrum licences acquired in 2012 in up to 16 installments, rather than the current ten, spreading out the payments over a longer period.

The cabinet also agreed to the telecom regulator's suggestion of doing away with the individual band limit of 50 per cent. It has also backed the Telecom Commission's call for scrapping the 50% cap on intra-band airwave holdings for telcos, and has instead imposed a separate 50% limit in the combined spectrum holdings across sub-1 GHz bands (read: 700 Mhz, 800 Mhz, 900 Mhz).

The package was cleared by the cabinet based on the recommendations of the inter-ministerial group on the telecom sector.

"While the increase in repayment term from 12 to 16 years will reduce the immediate cash outflows to some extent, the fundamental issue of Rs 7 lakh crore debt, race to the bottom on pricing of mobile services, significant annual servicing costs, declining revenues-need to be addressed comprehensively to make the sector viable", said Deloitte's Joshi. "The total amount received will be higher by Rs 74,446.01crore till 2034-35".

The move will facilitate consolidations as well as mergers and acquisitions in the sector.

The Cabinet on Wednesday relaxed spectrum holding limits and allowed telcos more time to pay for airwaves won in auction as part of measures to improve the health of an industry laden with debt amid intense competition.

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Rajan Mathews, director general, COAI said, "The new spectrum caps will facilitate consolidation in the industry - Reliance Jio-Reliance Communications and Idea-Vodafone".

However, more comprehensive steps are needed, say experts.

Market leader Airtel first took over Telenor and then Tata Group's consumer mobile business. The combined entity will replace Bharti Airtel Ltd as the country's largest operator. "Extending the time period for spectrum payments is good from cash flow perspective but it does not fix the real issues of the industry which has to pay nearly 30% of its revenues as levies to the government", said Rajan Mathews, director general of Cellular Operators Association of India (COAI), an industry body. "Revising the limit for the spectrum cap holding will facilitate consolidation of telecom licensees and may encourage the participation in the future auction", the government said in an official statement.

A media report indicated that these measures may boost telecom companies cash flow by Rs 55,000 crore.

Telecom operators have traded charges on multiple occasions, blaming each other for the sector's financial difficulties.

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