Saddled with a debt of around Rs 4.6 lakh crore, the bulk of which has gone into acquiring spectrum in auctions, the telecom industry has urged the government for some relief in the deferred payment mechanism through which it pays its dues to the government. The industry, which has invested around Rs 3.45 lakh crore in spectrum purchase since 2010, wants the two-year moratorium it gets after paying the first instalment to be extended to five years. It also wants that the remaining payment, which needs to be paid over the next 10-year period, be extended to 15 years. This, it feels, would give it cash flow relief.
Currently, after the auctions are over, successful companies are supposed to pay either 25 percent or 50 percent (depending upon the band of spectrum acquired), of the total amount upfront, followed by a two-year moratorium and the remaining amount in 10 equal instalments spread over 10 years at net present value. It also wants the revenue share licence fee and spectrum usage charges to be lowered.
“With regard to helping the telecom industry deal with the financial crisis that it finds itself in, various steps have been proposed, of which one is to increase this period (moratorium) from 2 to 5 years and also increase the deferred payment time from the current 10 years to 15 years,” COAI director general Rajan S Mathews told FE. Explaining the rationale behind the proposal, he said that the sector is witnessing one of the toughest times with revenues and profits coming down due to the firms offering competitive mobile tariffs, including bundled offers to customers, and this is at a time when the firms have to make investments for expansion of 4G.
Mathews also said that regulator Trai had made recommendations regarding LF and SUC, which it would request the government to consider. Trai had recommended a reduction in licence fee from 8 percent to 6 percent , and making SUC flat to 3 percent and later to 1 percent , while increasing the duration of deferred payment spectrum amount to 20 years from the current 10 years. The government has in the past rejected these recommendations.
The government has recently constituted an inter-ministerial group to look into the financial stress of the telecom companies and suggest measures. Of the Rs 3.45 lakh crore of spectrum bought by the industry, it has paid Rs 1.90 lakh crore upfront. It needs to pay the balance amount with interest totalling Rs 3.08 lakh crore over the next 11 years up to 2028-29. The industry owes about Rs 4.60 lakh crore to various financial institutions and banks. – Financial Express