Breather comes in for Airtel, Voda-Idea, Cabinet approves proposal for mitigating their current financial stress

A sigh of big relief to Airtel and Vodafone Idea! The Union Cabinet chaired by Prime Minister Narendra Modi has come to their aid by approving the proposal for mitigating their financial stress.  It may be recalled that both the TSPs are currently facing extreme financial stress due to the AGR dues running in several thousand crores.

The decision by the Cabinet reads as follows:

"The Department of Telecommunication will give an option to the Telecom Service Providers (TSPs) to defer payment of the spectrum auction installments due for 2020-21 & 2021-22, either for one or both years.  These deferred amounts bill be spread equally in the remaining instalments to be paid by TSPs. Interest as stipulated while auctioning of the concerned spectrum will, however, be charged so that NPV is protected. 

Deferment of spectrum auction instalments will ease the cash outflow of the stressed TSPs and facilitate payment of statutory liabilities and interest on bank loans.  Continued operation by TSPs will give a fillip to employment and economic growth.  The improved financial health of TSPs will facilitate the maintenance of the quality of services to the consumer.

The decision for deferring spectrum payment instalments for two years will be implemented within a fortnight.  Amendment to the License shall be issued expeditiously with the approval of Hon’ble Minister of Communications."

The decision implies that Airtel and Reliance Jio would need to make the next spectrum payment to the government only in fiscal 2022-23.