Vodafone Idea shares rose 2.9 per cent after the government announced telecom reforms.
New Delhi:
The Union Cabinet today approved a relief package for the cash-strapped telecom sector, including a four-year moratorium on airwave payments due to the government, the Telecom Minister said.
The deferred payment cycle will begin on October 1, Telecom Minister Ashwini Vaishnav said, giving debt-ridden Vodafone Idea – which had earlier said it runs the risk of shutting down without government help – more time to pay dues.
Shares of Vodafone Idea rose 2.9 per cent on the news, while Bharti Airtel ended up 4.5 per cent in the broader Mumbai market, which ended up 0.8 per cent.
Some of the other measures announced in the telecom package include increasing the tenure of airwaves held by firms to 30 years from the current 20 years, waiving usage charges for airwaves acquired through future auctions and completely free sharing of spectrum between carriers. Yes, said Sri Vaishnava.
Bharti Airtel and Reliance Jio said the measures would boost growth in the telecom industry. UK’s Vodafone Group and India’s Aditya Birla Group, owners of Vodafone Idea, said the reforms would help destabilize the telecom sector.
The telecom sector fell into trouble with the entry of billionaire Mukesh Ambani’s Reliance Jio in late 2016, sparking a price war that forced some rivals out of the market and turned profits into losses.
Mr Vaishnav said the government is changing the controversial definition of Adjusted Gross Revenue (AGR) to calculate telecom revenue only.
India had long held that companies’ non-telecom revenues were also part of the AGR, leading to a protracted legal battle that culminated in 2019 with the Supreme Court’s approach to the government and nearly $13 billion for wireless carriers. brought the bill.
All telecom reforms, Mr Vaishnav said, will be implemented going forward, meaning carriers still have to settle billions of dollars in outstanding AGR payments to the government.
Relief for Vodafone Idea
The measures, which also include a four-year moratorium on payment of AGR dues, will likely ease the cash crunch at Vodafone Idea.
The Supreme Court had directed the companies to clear the AGR dues by 2031.
Vodafone Idea, a combination of Britain’s Vodafone Group and the India arm of domestic telecommunications firm Idea Cellular, has paid Rs 78.54 billion ($1.07 billion) in AGR dues to the government, but still owes about Rs 500 billion.
It is steeped in net debt of Rs 1.91 lakh crore and the resignation of its billionaire chairman last month raised fears that only two major carriers could remain in the country.
Shri Vaishnav today said that the government does not want monopoly.
“We believe that there should be healthy competition in this area. And for this, there will be further improvements when 5G spectrum is auctioned… so that more and more players can enter this space,” he said.
Bharti Airtel has said it has paid an estimated Rs 180 billion and government data shows it owes another Rs 259.76 billion.
The latest carrier, Reliance Jio, has already paid its small part of the AGR dues.
As part of the measures, the cabinet also allowed 100 per cent foreign direct investment in the sector through the automatic route, Mr Vaishnav said, a move that would allow easier investment in the sector without separate government approval.
Sonam Chandwani, managing partner of law firm KS Legal & Associates, said, “The relief comes on time, and it will at least help telecom companies navigate the market.”
.