In a bid to provide relief to stressed telecom sector, the Union Cabinet on Wednesday has approved a relief measures for the industry. The package include a moratorium with interest rate for four years to pay dues, a change in definition of Adjusted Gross Revenues (AGR) and reduction in spectrum usage charges. among others. This reform will provide much-needed time to ailing telecom operators like Vodafone Idea that have been reeled under huge debt to pay the AGR dues.
“PM took a bold decision over AGR (adjusted gross revenue) today. A decision has been taken to rationalise the definition of AGR,” telecom minister Ashwini Vaishnaw said while announcing the measures.
Out of the three telcos, Vodafone Idea has been under a debt of Rs 1.8 lakh crore. The telecom operators’ deferred spectrum dues was estimated at Rs 96,270 crore, AGR dues at Rs 58,400 crore. Kumar Mangalam Birla, former chairman of Vodafone Idea Ltd, earlier wrote a letter to Cabinet Secretary offering his stake in Vodafone Idea to the government or any company approved by the government for free. On August 4, billionaire Birla resigned as chairman of beleaguered Vodafone Idea Ltd.
The government also approved 100 per cent foreign direct investment through automatic route in the telecom sector. The regime of penalty and interest on various license fees and charges was rationalised. The telecom minister said that the government will also allow companies to surrender spectrum after paying a fixed charge in case of change in business environment. It also approved spectrum sharing has been allowed completely.
“Competition is extremely important for telecom industry to offer choice to customers. This right has to be protected. The reforms are to ensure healthy competition and attract new players…there will be further reforms when we auction 5G so more players can enter the sector," the telecom minister said.
“Telecos would surely be welcoming the decision of the union cabinet today. Though all the decisions are prospective but they would do lot of good to the ailing sector. Moratorium of 4 years for the AGR with interest of MCLR +2% would help the telecos in managing their cash flows and also ensure that government’s interest is also protected. 100% FDI under automatic route is another major step in improving ease of doing business of this sector. It’s to be noted that the restrictions regarding fdi from land bordering countries would still be applicable in this case as well. Overall, it has been a day of bold and much needed reforms for the sector which is very crucial for the Digital India Dream," said Divakar Vijayasarathy, Founder and managing partner, DVS Advisors LLP.
Welcoming the reform measures for the telecom sector, Sunil Bharti Mittal, chairman, Bharti Airtel said, “The latest reforms ensure that the industry is able to invest fearlessly and support India’s digital ambitions. Bharti Airtel is fully committed to respond to the call by the Prime Minister to invest in and accelerate India’s growth. What lies ahead is a once in a lifetime opportunity to build the digital infrastructure that is a catalyst for the digital aspirations of over one billion Indians.”
“The reform package heralds a new dawn for the Indian telecom industry and will catalyse explosive growth of this vital sector. More importantly, it paves the way for a sustainable three private plus one state owned telecom operator structure to serve a large market like India," Mittal added.