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Telecom firms may get interim sops now, full relief package later

By / September 29, 2017 / / 0 Comments

The Telecom Commission may offer interim, piecemeal sops to debt-laden telecom firms, pending a comprehensive relief package that’s still some distance away, a person with direct knowledge of the matter said.

The apex telecom policymaking body is still awaiting clarifications it has sought from an inter-ministerial group (IMG) dealing with the issue, the person said on condition of anonymity. “We will take a little time… it (comprehensive package) may take a little longer. They (IMG) have given other clarifications… on some of the things, we are still waiting for clarifications,” the person said, without disclosing the clarifications the commission has sought.

In the interim, the commission may offer “piecemeal” relief measures, the person said.

On some matters such as calculation of adjusted gross revenue (AGR) in spectrum trading, the commission is expected to seek legal opinion from the law ministry, which will further extend the process of putting together a comprehensive package.

Telecom firms pay roughly 8% of AGR as licence fee and an additional 3% as spectrum usage charges, which are the two key avenues of government earnings from the telecom industry.

The IMG recommended to the commission that instead of taking into account the full present value of the spectrum for calculating AGR during the sale or purchase of spectrum, telecom companies should pay only the “differential”, which is the difference between the current value of the radio waves and the rate at which spectrum was bought in the first instance.

“So, one of the recommendations made was to look (only) at the differential. To which, TC said that since it is a part of the AGR, it is better to take a legal opinion. Maybe we (will) seek a legal opinion from the ministry of law,” the person said.

The Telecom Commission will take up these issues in its meeting on Friday.

The commission is believed to favour the IMG’s suggestion of extending the fee-payment tenure for auctioned airwaves to 16 years from 10 years and lowering the interest rate payable on unpaid dues.

Telecom firms sought a lowering of licence fees and spectrum usage charges, which the IMG has rejected. In a 22 August letter to telecom minister Manoj Sinha, Vodafone Group chief executive officer (CEO) Vittorio Colao had expressed the hope the IMG will recommend a reduction in the interest rate for deferred spectrum payments to 6.25% from over 9%, besides an increase in the payment period.

New entrant Reliance Jio Infocomm Ltd has opposed any relief being extended to the sector; the incumbents have lobbied hard to push their demands, citing fierce price competition from the company led by Mukesh Ambani and their own debt, which was Rs4.5 trillion at the end of 31 March. They owe close to Rs3 trillion in spectrum payment charges, according to industry estimates.

“The financial state of the sector… taxation is up to 32%, which is very high. With taxation being highest in the world and tariffs being lowest in the world… all of this needs to change,” said Gopal Vittal, CEO of Bharti Airtel Ltd.

The government’s inclination to offer telecom firms relief came in the wake of the tepid response to the last round of spectrum auctions in October 2016, in which some of the bands received no bids. The government collected 20% less than its targeted non-tax revenue from the sector in 2016-17 at Rs78,715 crore. For 2017-18, the ministry has conservatively estimated its receipts from the sector at Rs44,342 crore.

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