Telcos Receive Two Year Payment Moratorium on Spectrum Dues As First Sign of Relief from the Government

The telecom operators have been caught in a financially stifling situation since a long time, and a big blow had come in the form of the new AGR decision from the Supreme Court which had put an additional burden of Rs 1.3 lakh crore on the telecom operators. Now there are two avenues which the telecom operators are looking forward to, for financial relief. The first way seems to be through raising the tariffs in the industry which all the telecom operators have already acted on. Besides this, another relief might come from the government, wherein, the government has said that it will provide a payment moratorium of two years for the spectrum fees. This means that the subscribers will not have to pay the spectrum fees for FY21 and FY22, and the pending payment will be distributed over the rest of the lifetime of the spectrum, in such a way that it will be NPV-neutral for the government.

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Payment Moratorium Relief for Telcos

The analysts have also shared their views on this new development. As per a new ET Telecom report, the new move by the government to provide a two-year payment moratorium will bring some cash flow relief to the telecom operators. Jefferies has said in its note, “We expect the government to put a moratorium on AGR dues for the next two years, aiding cash flows. A reduction in license fee (helps Bharti/Voda Idea’s EBITDA by 5%/28%) and an extension of IUC are also likely.” This relief has been brought forth by the cabinet of ministers who have approved the payment moratorium for the telecom operators. Goldman Sachs has also made some comments on this new move saying that although it will ease the cash flow problems of the telcos, especially for Vodafone Idea, it won’t better the balance sheet leverage of the telecom operators which seems to be 20x net debt to EBITDA as of September 2019. The main relief for Vodafone Idea from this payment moratorium would be related to AGR dues.