The Indian government’s relief package for the struggling telecom sector has cheered the industry chiefs and analysts.
The package includes a four-year break for telecom companies from paying statutory dues, 100% foreign investment through the automatic route, permission to share scarce airwaves, and a change in the definition of revenue on which levies are paid.
The government, however, clarified that companies availing of the four-year moratorium will have to pay some interest. It also includes the scrapping of spectrum usage charge for airwaves acquired in future spectrum auctions.
The package is expected to help the debt-laden Vodafone Idea, which is facing an existential crisis as it has to pay the highest adjusted gross revenue dues of 584 billion rupees ($8 billion) dating back many years. One of its promoters, Kumar Mangalam Birla, had on August 4 resigned from the chairman’s post and even offered his share to the government to keep the company afloat.
Birla called the latest reforms “pathbreaking” and said it “will go a long way in unshackling the telecom sector. These reforms demonstrate the government’s firm commitment to ensuring healthy growth of the industry.”
Nick Read, CEO of Vodafone Group, the other joint venture partner, also welcomed the package. He said, “Although the sector has struggled for many years, we expect that the Government’s constructive initiative announced today – along with the continued strong support of the Telecom Minister and Finance Minister – will be the beginning of a new era for India’s digital ambitions.”
Market experts believe the latest measures will help Vodafone Idea boost its cash flows and improve its chances of survival. However, they pointed out that the company should carry out its fundraising plans, ramp up the 4G network and work toward reducing subscriber desertions.
The other legacy telecom operator hit by the adjusted gross revenue dues, Bharti Airtel, has said it will opt for a payment moratorium and redirect the cash flow to aggressively build networks. Chairman Sunil Bharti Mittal said the reforms will spur growth and pave the way for all players to come together and work as a team to unleash India’s telecom dream.
He felt that tariffs need to go up, and more needs to be done on goods and services tax, license fees, high levies. Mittal hinted that Bharti Airtel could take a lead in tariff hikes. The company had earlier said the reform will pave the way for a sustainable three private players plus one state-owned telecom operator to serve a large market like India.
The country’s leading player Reliance Jio, promoted by India’s richest man Mukesh Ambani, has termed the reforms as timely and will encourage the company to provide greater benefits to the customers. In a statement, Ambani said, “I welcome the Government of India’s announcement of reforms and relief measures that will enable the industry to achieve the goals of Digital India.”
After making the announcement, Telecom Minister Ashwini Vaishnaw said, “The reforms are deep and broad. They are structural. These reforms 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.” The moratorium will not impact the government’s revenue, he added.
The minister felt that with more reforms, and more structural changes, that are in the pipeline, “more players should come”. He said the much-awaited 5G spectrum auctions will “most probably” be held in February 2022, and the government may even try to advance them to January.