A man speaks on his mobile phone near a general store in Kainad village in Dahanu Road, India. (Photographer: Dhiraj Singh/Bloomberg)

IMG Heeds Most Demands Of Telecom Operators, Suggests Spectrum Auction Next Fiscal 

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Summary
  • IMG suggests new round of spectrum auction be held in the next fiscal
  • Recommends that the payments for spectrum be taken in 16 instalments
  • Favours a cut in interest rates on penalties by switching to an MCLR-based rate
  • Telecom Commission will meet on September 8 to deliberate on the recommendations of IMG

An inter-ministerial group on the telecom sector's financial woes has accommodated most of the industry's demands in its recommendations to the government, including deferring of spectrum auction to the next fiscal, more time for payment of radiowaves and a cut in levies.

According to an official, the IMG submitted its report on August 31, which will be considered by the Telecom Commission scheduled to meet on September 8 for further decision.

Regulator TRAI has started the consultation process for the next round of spectrum auction that includes radiowaves for 5G services and frequencies such as the prized 700 MHz that had no takers in the previous auction.

About 7,500 Mhz of spectrum is under consideration for the auction, which will be about three times the quantum of radio frequencies for mobile services placed for auction in 2016.

Total spectrum worth Rs 5.63 lakh crore was put up for sale, but 61 percent of it remained unsold.

The telecom industry has been reeling under poor financial health, falling revenue and profitability and is staring at Rs 4.5 lakh crore of debt.

What The IMG Recommended

  • Allowing telecom operators to make payment for spectrum purchased in auction in 16 annual instalments instead of 10 under the current norms.
  • Favoured a cut in interest rates on penalties by way of switch from PLR- to MCLR-based rate, which could provide relief of about 2 percentage points in the current situation.
  • Making available 20 Mhz of radiowaves in 2300 band before the auction.
  • Reduction in licence fee and spectrum usage charges under the new telecom policy.

What IMG Has Not Heeded

  • Demand of Vodafone to reduce interest rate of 10 percent charged on spectrum payments to around 6.25-6.5 percent.

Responding to PTI queries, industry body Cellular Operators Association of India (COAI) said the IMG's recommendations “ease debt part of the industry, but no immediate relief”.

The industry was expecting immediate relief on licence fees and spectrum usage charges as per TRAI recommendation. Unless these issues are not resolved, the industry will continue to struggle financially.
Rajan Mathews, Director General, COAI

The IMG – comprising senior officials from ministries of finance and communications – was constituted in mid-May to “examine systemic issues affecting viability and repayment capacity in the telecom sector and furnish recommendations for resolution of stressed assets”.

Also Read: How IMG’s Decisions Can Change The Fortunes Of Indian Telecom Industry

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