Big-bang reforms in telecom sector: 4-year loan moratorium, 100% FDI

Mukesh Ranjan

Tribune News service

New Delhi, September 15

The Centre today approved the much-awaited relief package for the stressed telecom sector that includes a four-year moratorium on payment of dues by telecom companies and allowing 100 per cent foreign direct investment (FDI) under the automatic route.

Announcing the decisions cleared at a Union Cabinet meeting chaired by Prime Minister Narendra Modi, Information Technology and Communication Minister Ashwini Vaishnaw said, “The reforms are deep and broad… structural… will bring in change today, tomorrow and in the future. I do not like to put a number on the package as it is revenue-neutral for the government.” He went on to add that the moratorium would not impact the government’s revenue.

Incidentally, the government announced the package six weeks after Kumar Mangalam Birla resigned from the post of chairman of Vodafone Idea Limited, which was created following the merger of British telecom giant Vodafone’s India unit and Birla’s Idea Cellular Ltd. The company has to pay around Rs 50,399.63 crore as statutory dues based on AGR (adjusted gross revenue) over the past several years.

The relief package will include a moratorium on payments for airwaves and is aimed at helping telecom service providers (TSPs) like Bharti Airtel, Reliance Jio and Vodafone Idea, industry sources said. They said as per the announcement, the companies would also have the option to convert interest on spectrum dues of the four-year moratorium period into government equity.

Last year, the Supreme Court passed a ruling asking Bharti Airtel and Vodafone Idea to clear government dues, which hit the sector hard and even banks led by the SBI had called on the government to give Vodafone Idea more time to clear its tax dues.

Along with the relief package, the government has also approved a number of structural and process reforms in the sector. “These are expected to protect and generate employment opportunities, promote healthy competition, protect interests of consumers, infuse liquidity, encourage investment and reduce regulatory burden on the TSPs,” the minister said.

Among these changes, there are nine structural and five process reforms and the AGR definition had been rationalised to exclude non-telecom revenues, the minister said.

To encourage investment, he said, 100 per cent FDI under automatic route had been permitted, besides rationalising spectrum user charges. “In future auctions, tenure of the spectrum will be increased to 30 years from 20 currently. Auction calendar has been fixed. The spectrum auctions will be normally held in the last quarter of every financial year. The tower set-up process will now be simplified on the basis of self-approval,” Vaishnaw said.

Easy switch from prepaid to postpaid

KYC process for shifting from prepaid to postpaid has been done away with. All portals to be integrated with that of Telecom Dept for ease of doing business.

Spectrum auction tenure now 30 years

In future auctions, tenure of spectrum will be 30 years instead of 20 currently
Spectrum auctions will be normally held in the last quarter of every fiscal
The tower set-up process will now be simplified on the basis of self-approval
AGR (adjusted gross revenue) definition rationalised to exclude non-telecom revenues
Spectrum user charges rationalised too

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