Indian GSM telecom operators have said that the government had not done much to address the systemic issues of the industry, such as reduction in USOF, license fees, and Spectrum Usage Charges (SUC) as already recommended by the regulator, Trai. They also said that the government’s recent move to extend spectrum payment tenure would not bring any real tangible financial benefit to the industry.
The COAI (Cellular Operators Association of India), however, welcomed the decision by the Telecom Commission, to approve the Inter-Ministerial Committee’s recommendations regarding the financial health of the telecom sector. The association said that they hope that the government will continue to look into the matter and that the earlier notion, that the telecom industry was simply a cash cow for the government only to be milked for levies & taxes had changed for good.
The body said that the decisions to increase the overall Spectrum Cap would facilitate mergers and acquisitions in the sector, bringing in significant costs saving and reduction in hyper-competition, stabilising the sector in the long run.
The telcos, through their lobby body COAI, said that the decision to allow 100% FDI through the automatic route is a welcome step, considering the fact that the Industry needs substantial investment in the coming years.
“Only in a conducive and mutually supportive environment can the industry continue to provide value and new technology to customers, as well as enhanced revenue to the Government,” Mathews said. He remained hopeful for urgent and immediate substantive relief measures while welcoming the steps taken by the Government so far.
It said that the decision to reduce the interest rate charged, as a penalty for the overdue payments by about 2% is also an extremely well-meaning and conducive step. However, not all the decisions taken will have a significant impact on the industry.
“The decision to extend the deferred payment of spectrum from the current ten equal annual instalments to 16 equal annual instalments will ease the cash flows in the initial years. However, since only the spectrum payment tenure is being extended, no real tangible financial benefit will accrue to the industry,” Rajan S. Mathews, Director General, COAI said.
“While this does give initial cash flow relief, the industry will end up paying more over the life of the debt arising from the lengthened time period of the payments. The additional payment on account of this is expected to be around Rs 80,000 crores. Along with extending the deferred payment schedule, a nominal interest rate should have also been prescribed instead of the existing rates,” he added.
The Telecom Commission, the highest telecom policy decision making the body of the government, met on Tuesday 9th January, to deliberate over the recommendations of the IMG, submitted in August last year. The IMG was formed to look into various measures to be taken to improve the deteriorating financial health of the Indian telecom sector, that is currently struggling to manage a cumulative debt estimated, at Rs 4.6 lakh crores, against revenues that have fallen to less than Rs 2 lakh crores.