Govt defers recovery of Rs45,000-crore dues of Vodafone, Airtel
21 November 2019
Spurred by an across-the-sector price hike and a government announcement to defer recovery of Rs45,000-crore of dues related to revenue share and spectrum licence fee by the government, loss-hit telecom companies - Vodafone Idea Ltd and Bharti Airtel Ltd - are hoping to spring back to life, although at some cost to consumers.
The government on Wednesday decided to defer spectrum payments due from telecommunications companies for two years, giving the price-war hit industry a reprieve more time to repay its mounting debt after the Supreme Court order that the telcos pay up overdue revenue share and spectrum licence fee to the government worth around Rs93,000 crore.
The moratorium will be for two years beginning April 2020, finance minister Nirmala Sitharaman told reporters after a cabinet meeting in New Delhi on Wednesday. Interest as stipulated in airwave auctions will continue to be paid, she said.
The relief will be worth as much as Rs45,000 crore ($6.3 billion) and the panel will continue to discuss other measures to help the industry, an official told reporters.
The relief measures follow the recommendations of a panel of government secretaries set up by Prime Minister Narendra Modi to help wireless carriers the government to decide on the Rs143,500 crore ($20 billion) in license fees and spectrum charges the telcos owed to government.
Finance minister Nirmala Sitaraman had earlier said the government wants at least three functioning telcos to retain competitiveness of the telecom industry.
The Modi government intends to help preserve the survivors in a telecommunications industry that has shrunk from a dozen wireless operators a couple of years back to just three private-sector - Bharti Airtel, Vodafone Idea Ltd and Reliance Jio Infocomm. Other firms had to merge or shut shop amidst an intense price war spurred by the entry of Reliance Jio Infocomm Ltd., led by billionaire Mukesh Ambani, in 2016.
The relief on fees comes after Vodafone Idea Ltd. posted the worst quarterly loss in India's corporate history earlier this month and Bharti Airtel Ltd. logged a record deficit for the September quarter.
Jio, which overtook both companies and became the top carrier by subscribers this year, had argued against government action to help Vodafone Group Plc's Indian venture and Bharti, which is backed by billionaire Sunil Mittal and Singapore Telecommunications Ltd.
Telcos are pinning hopes on the government’s promise of help and plans announced by all three private sector firms and state-run Bharat Sanchar Nigam Ltd (BSNL) to raise prices.
Telecom providers in India pay the Department of Telecommunications (DoT) 3-5 per cent of their Average gross revenue (AGR) in spectrum usage charges and 8 per cent as licence fees.
Companies have long argued that AGR should comprise just revenue accrued from core services, while the government says it should include all revenue. The Supreme Court last month upheld the DoT’s definition.