www.thesuniljain.com

Bleeding telcos get a band-aid for now PDF Print E-mail
Thursday, 08 March 2018 03:55
AddThis Social Bookmark Button

Rishi Kala story

 

Bleeding telcos, hoping to get a respite from crippling government levies, got a mere band-aid solution for now – Wednesday’s cabinet decisions were more aimed at ensuring better government revenues rather than addressing industry issues. That, if it happens at all, will have to wait till the National Telecom Policy is announced, possibly next month.

 

Even before RJio’s entry caused telecom tariffs to collapse, beleaguered telcos were finding it difficult to service debts and many were on the verge of shutting down – the industry collectively owes banks/others Rs 4.6 lakh crore and has deferred payment liabilities to the government of Rs 3.1 lakh crore. Much of this is due to the fact that the share of revenue going to the government by way of recurring license/spectrum charges and auction-bids rose from 11% in FY07 to 32.4% in FY17 – if service taxes are included, the number rose from 23.2% to 47.4%.

 

Wednesday’s measures will, of course, help consolidation and allow telcos with strong balance sheets to buy the spectrum assets of firms that have already shut or are in the process of doing so.

 

So, the cabinet approved various recommendations of an inter-ministerial group that dealt with this. Telcos can now own 35% of spectrum sold by the government, up from the 25% limit. The current intra-circle band has been totally removed and, instead, the 50% cap will now apply to the combined spectrum holdings in the sub-1 GHz band that is 700, 800 and 900 MHz bands.

 

This means more M&As had these norms not been changed, telcos like Vodafone and Idea, for instance, would have hand to surrender spectrum in certain circles when they merged. Also, with just four operators left – Rjio, Bharti Airtel, Vodafone-Idea and MTNL-BSNL, not removing the caps would have made it difficult for the government to sell fresh spectrum.

 

Given the industrys cash-flow problems, the Cabinet allowed telcos to opt for a 16-year payments plan instead of the current 10-year one, but since the NPV of the payments has to remain unchanged, this just eases cash flows, nothing else.

 

While industry is awaiting the national telecom policy for reduction in annual license/spectrum charges, it is not clear by how much these will be reduced, if at all since political parties could argue this is favouritism on the part of the government.

 

You are here  : Home