In a major relief, the Union Cabinet on Wednesday relaxed spectrum holding limits and allowed telcos more time to pay for airwaves won in auction in a bid to to improve the debt-heavy and financially stressed telecom industry. The move is seen to boost consolidation in the industry, with a major Idea- Vodafone merger already on the cards, and telecom experts calling for just four players in the entire industry including the state-run BSNL. After the change in rules, telecom companies can now own 35 percent of spectrum sold by the government, up from the 25 percent limit earlier.
Further, the intra-circle band has been totally removed and, instead, the 50 percent cap will now apply to the combined spectrum holdings in the sub-1 GHz band — that is 700, 800 and 900 MHz bands. The change in rules allows for the Idea-Vodafone combine to retain the spectrum, which it would have had to otherwise surrender in case it exceeded the limit in certain circles. Further, with just four operators left of Reliance Jio, Bharti Airtel, Vodafone-Idea and MTNL-BSNL not removing the caps would have made it difficult for the government to sell fresh spectrum.
While the relaxed norms will come as a welcome relief, more needs to be done to provide relief to the telecom sector. According to global firm Jefferies, the move does little to mend balance sheets of the incumbent players. Major telecom players find it difficult to service debts and many were on the verge of shutting down, even before RJio’s disruptive entry into the market. According to a report in the Financial Express, 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.
Jefferies says the move will help to pay the companies to pay their deferred spectrum liabilities over a period of 16 years as opposed to 10 years earlier. Further, the firm said that incumbent players other than RJio will benefit from relaxed norms. According to Jeffieres, the competition may still remain elevated till market share improves. – Financial Express