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IMG concludes report on telecom woes, some relief on plate

LiveMint logoLiveMint 31-08-2017 PTI

New Delhi: The inter-ministerial group (IMG) looking into telecom companies’ financial stress has finalised its report, outlining recommendations for providing relief to the debt-ridden sector. The finalisation of the report comes after a three-month long deliberation by the high-powered committee.

The IMG is learnt to have favoured increasing the timeline for deferred spectrum payment for telcos, and shifting from prime lending rate (PLR) to marginal cost of funds-based lending rate (MCLR) for interest and penalty payments with regard to licence fee and spectrum usage charges.However, the committee has not suggested any cut in licence fee or spectrum usage charges levy, given that the initial signs of recovery are visible in the sector, an IMG member told PTI.

On the issue of removing 50% spectrum cap—within a particular band—for mergers and acquisitions, the high-powered panel is of the view that the matter can be looked into by telecom regulator, the Telecom Regulatory Authority of India (Trai).

On Wednesday, the department of telecom (DoT) secretary Aruna Sundararajan had said the recommendations of the IMG will be placed before the Telecom Commission whose next meeting is slated for 8 September. The proposals will thereafter require cabinet nod.

“The norms were framed with cabinet approval, so any change will also need to be placed before the cabinet,” said the official who did not wish to be named.

The IMG, in its report running into 80-90 pages, has deliberately not put any figure to the total relief flowing from the proposals, the official added. Some of the other suggestions pertain to ease of doing business, the official pointed out.

One of its significant recommendations pertains to giving more time to telecom companies to pay for the spectrum they buy. Currently, a portion of spectrum auction amount is taken as upfront payment by the DoT and the balance after a two-year moratorium is paid out every year in 10 instalments. There are indications that the telecom companies could be given 16 years (plus two-year moratorium) instead of 10 years for such deferred spectrum payment.

The IMG, comprising senior officials from ministries of finance and communications has, over the last three months, deliberated on various steps that can be taken to address the financial woes of the industry.

The industry is reeling under Rs4.6 trillion of cumulative debt and facing severe pressure on revenue and profitability. In June, the IMG held extensive discussions with all telecom players and large banks on the industry’s financial difficulties.

Established telecom operators have been blaming competition triggered by the entry of Reliance Jio, for their operational difficulties.

In fact, Vodafone Group chief executive Vittorio Colao, had recently written to telecom minister Manoj Sinha expressing hope that the IMG will recommend “a reduction in the interest rates for deferred spectrum payments to 6.25% in line with the improved macroeconomic trends and an increase in the period of payment for spectrum”.

The Vodafone top honcho, in the letter dated 22 August, had also rued about the deteriorating financial position over the last 9-12 months due to “unchecked price competition with services offered below cost for considerable periods of time”.

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