COAI (Cellular Operators Association of India), the apex industry association representing the country’s major Telecom, Internet, Technology and Digital Services companies, welcomed the decision by the Telecom Commission, to approve the Inter-Ministerial Committee’s recommendations regarding the financial health of the telecom sector.
The Telecom Commission, the highest telecom policy decision making body of the government, met on Tuesday 9th January, to deliberate over the recommendations of the IMG, submitted in August last year. The IMG was formed to look into various measures to be taken to improve the deteriorating financial health of the Indian telecom sector, that is currently struggling to manage a cumulative debt estimated, at INR 4.6 lakh crores, against revenues that have fallen to less than INR 2 lakh crores.
Amongst the decisions taken by the Telecom Commission, in the meeting which ran till late in the evening, several decisions encouraging investments and mergers were taken and they have been welcomed by the industry. The decisions to increase the overall Spectrum Cap, will facilitate Mergers & Acquisitions in the sector, bringing in significant costs saving and reduction in hyper-competition, stabilising the sector in the long run. Additionally, the decision to allow 100% FDI through the automatic route is a welcome step, considering the fact that the Industry needs substantial investment in the coming years.
The decision to reduce the interest rate charged, as penalty for the overdue payments by about 2% is also an extremely well meaning and conducive step. However, not all the decisions taken, will have a significant impact on the industry. “The decision to extend the deferred payment of spectrum from the current 10 equal annual instalments to 16 equal annual instalments will ease the cash flows in the initial years. However, since only the spectrum payment tenure is being extended, no real tangible financial benefit will accrue to the industry,” Rajan S. Mathews, Director General, COAI stated.
“While this does give initial cash flow relief, the industry will end up paying more over the life of the debt arising from the lengthened time period of the payments. The additional payment on account of this is expected to be around INR 80,000 Crores. Along with extending the deferred payment schedule, a nominal interest rate should have also been prescribed instead of the existing rates,” he added.
Mathews, further expressed disappointment that the government had not done much to address the systemic issues of the industry, such as reduction in USOF, License Fees (L.F) and Spectrum Usage Charges (SUC) etc. as already recommended by the TRAI. However, he remained optimistic that the government will continue to look into the matter and that the earlier notion, that the telecom industry was simply a cash cow for the government only to be milked for levies & taxes had changed for good.
“Only in a conducive and mutually supportive environment can the industry continue to provide value and new technology to customers, as well as enhanced revenue to the Government,” Mathews said. He remained hopeful for urgent and immediate substantive relief measures while welcoming the steps taken by the Government so far.