Government To Recommend Package To Relieve Telecom Sector’s Financial Stress
The government is set to recommend a package to the telecom sector to help its financial stress, according to a DoT official.
The Committee of Secretaries under the Cabinet Secretary will examine all aspects of the financial stress faced by India’s telecom service providers and recommend a package for the sector, according to a government official.
This is in response to representations made by telecom giants including Bharti Airtel Ltd. and Vodafone Idea Ltd. which sought reduction and deferment of dues in the face of the Supreme Court’s verdict on adjusted gross revenue, an official at Department of Telecommunications told BloombergQuint on the condition of anonymity.
The government will facilitate an environment which continues to herald growth of the telecom sector, the official said.
Telecom operators requested the following of the government:
- Reduction of Universal Service Obligation Fund to 3 percent from the current 5 percent.
- Reduction of spectrum usage charges.
- Input tax credit to be adjusted against future government levies.
- Viable pricing for voice and data.
- Deferment of spectrum auction payment due for financial year 2020-21 and FY22.
This comes days after the Supreme Court ruled that India’s telecom operators will have to include non-core revenue to calculate levies, dealing a crippling blow—worth Rs 92,000 crore—to the bruised industry that stares at dues and penalties worth thousands of crore. The carriers will have to pay penalty and interest, it said.
This is at an especially bad time for Vodafone Idea and Bharti Airtel when their debt has ballooned and profits have fallen after Mukesh Ambani’s Reliance Jio Infocomm Ltd. upended the nation’s telecom market with rock-bottom tariffs, wiping out smaller rivals and forcing others to merge. According to numbers filed with the court, Bharti Airtel will have to pay up Rs 21,682 crore and Vodafone Idea will have to pay Rs 28,309 crore.
Spectrum usage charges stand at 3-4 percent of adjusted gross revenue while USOF stands for 5 percent, according to data compiled by BloombergQuint.
Bharti Airtel pays Rs 5,800-6,500 crore towards spectrum auction dues annually while Vodafone Idea pays around Rs 11,600-12,000 crore, according to BloombergQuint’s calculations. On the other hand, input tax credit standing on Airtel’s book is close to Rs 10,000-11,000 crore while that for Vodafone Idea is around Rs 6,700 crore, the data showed.
Bharti Airtel deferred the announcement of its quarterly results today to Nov. 14, citing uncertainty regarding adjusted gross revenue.