India's Telecom Industry Gets A Government Lifeline
Telecom minister Ashwini Vaishnaw made key announcements on AGR, a moratorium on dues to government, spectrum and FDI.
The cabinet approved relief measures for India's telecommunications industry that has in the past decade narrowed to just three players—Bharti Airtel Ltd., Reliance Jio Infocomm Ltd. and Vodafone Idea Ltd.—with the last one in distress.
In a media briefing after the cabinet meet on Wednesday, Telecom Minister Ashwini Vaishnaw announced measures on AGR, spectrum, foreign direct investment and a moratorium on dues to the government. Together, these will give the companies a financial breather even as they make efforts to increase pricing and improve average revenue per user.
Adjusted Gross Revenue
Definition of AGR for telecom companies will be rationalised.
Non-telecom revenue will not be included in AGR.
The Supreme Court judgment had said no past assessments should be done.
Any AGR definition changes will be prospective and be applicable from an appointed date.
Moratorium/Deferment
Telecom companies to get 4-year moratorium to repay dues to the government.
The moratorium for telecom industry will kick in from Oct. 1.
Those who avail of the option will pay interest on the moratorium amount.
All dues, including AGR and spectrum-related dues, will be covered under the moratorium.
Interest will start accruing from Oct. 1 and the payment will be at the end of the year.
Option to telecom companies to pay the interest amount arising due to the said deferment of payment by way of equity.
Government to exercise option to convert due amount into equity at the end of the moratorium/deferment period.
Finance ministry to finalise guidelines for such conversion.
Stress in the telecom industry will now be resolved with this decision, Vaishnaw said.
This will lead to improved cashflows for telecom companies which then can be deployed for upgradation from 4G networks to 5G.Ashwini Vaishnaw , Minister for Communications, Electronics & IT
Rationalisation Of Bank Guarantees, Interest Payment
Multiple bank guarantees in different Licenced Service Areas not required. One bank guarantee will suffice.
Starting Oct. 1, delayed payments of license fee/spectrum usage charge will attract interest rate of SBI’s MCLR plus 2% instead of MCLR plus 4%;
Interest will be compounded annually instead of monthly and penalty and interest on penalty to be removed.
Spectrum And Auctions
Spectrum holding duration to be extended to 30 years from 20 years currently.
Spectrum can be surrendered after 10 years in case of technology change.
No Spectrum Usage Charge for spectrum acquired in future spectrum auctions.
Additional SUC of 0.5% for spectrum sharing removed to encourage spectrum sharing.
Telecom auction will be held in the last quarter of every financial year.
No bank guarantees required in future auctions.
Vaishnaw said the government wants to promote healthy competition in the telecom sector.
For that, there will be further reforms when the 5G spectrum auctions are held. More choices for the customer is a stated commitment of the government.Ashwini Vaishnaw, Minister for Communications, Electronics & IT
Foreign Direct Investment
100% FDI in telecom will be allowed through automatic route, up from 49% allowed right now.
KYC And Procedural Changes
Self-KYC (App based) to be permitted.
E-KYC rate revised to only one rupee.
Shifting from prepaid to post-paid and vice-versa will not require fresh KYC.
Paper Customer Acquisition Forms to be replaced by digital storage of data. Nearly 300-400 crore paper CAFs lying in various warehouses of telecom companies will not be required. Warehouse audit of CAF will not be required.
Telecom companies welcomed the "reforms and relief" package announced by the government.
"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," Mukesh Ambani, chairman of Reliance Industries, was quoted as saying in a company statement.
The government's telecom reform package will catalyse explosive growth in the sector, said Sunil Bharti Mittal, chairman of Bharti Airtel, in a statement.
"The latest reforms ensure that the industry is able to invest fearlessly and support India’s digital ambitions."
The reforms will go "a long way in unshackling the telecom sector," said Kumar Mangalam Birla, chairman of the Aditya Birla Group, promoter of Vodafone Idea.
"Although the sector has struggled for many years, we expect the Government's constructive initiative announced today...will be the beginning of a new era for India's digital ambitions and for VI's continued contribution to creating an inclusive and sustainable digital society...," said Nick Read, chief executive officer of Vodafone Group in the company statement.
Watch the media briefing after the cabinet meet.