Telecom reforms usher in new era for India’s digital ambitions: Telcos

The telecom reforms announced by government are beginning of a new era for sector as well as for boosting investment in the industry that is reeling under debt burden, leading sectoral players said


telecom sector in India | Digital India | Telcos

The telecom reforms announced by the government are the beginning of a new era for the sector as well as for boosting investment in the industry that is reeling under debt burden, leading sectoral players on Wednesday said.

Vodafone Idea, the player under severe crisis, also lauded the decision with its promoter Aditya Birla Group Chairman Kumar Mangalam Birla calling the reform measures “pathbreaking” that will go a long way in unshackling the telecom sector.

The Union Cabinet has approved a big-bang relief package for the stressed telecom sector that includes a four-year break for companies from paying statutory dues, permission to share scarce airwaves, change in the definition of revenue on which levies are paid and allowing 100 per cent foreign investment through the automatic route.

The measures, which aimed at providing relief to companies such as Vodafone Idea that have to pay thousands of crores in unprovisioned past statutory dues, also include the scrapping of spectrum usage charge (SUC) for airwaves acquired in future auctions.

It also provides telecom companies with an option to pay the interest amount arising due to the deferment of payment by way of equity.

“These reforms demonstrate the government’s firm commitment to ensuring healthy growth of the industry. The measures also reflect the decisiveness of…the government to address long-standing issues.

“These reforms will bring alive the digital aspirations of 1.3 billion people and accelerate India’s journey to be a digitally powered economy as envisaged by our Honorable Prime Minister (Narendra Modi),” Birla said.

In June, Birla had written to the government that investors are not willing to invest in the company in the absence of clarity on AGR liability, adequate moratorium on spectrum payments and most importantly floor pricing regime above the cost of service.

Birla, who holds a 27 per cent stake in VIL, had offered to hand over his stake in the debt-laden firm to the government or any other entity that the government may consider worthy to keep the company operational.

According to official data, VIL had an adjusted gross revenue (AGR) liability of Rs 58,254 crore, out of which the company has paid Rs 7,854.37 crore and Rs 50,399.63 crore is outstanding.

VIL’s gross debt, excluding lease liabilities, stood at Rs 1,80,310 crore as of March 31, 2021. The amount included deferred spectrum payment obligations of Rs 96,270 crore and debt from banks and financial institutions of Rs 23,080 crore apart from the AGR liability.

Voafone Group CEO Nick Read, majority stakeholder in VIL, commended the resolve shown by the government to find a comprehensive solution that would support a competitive and sustainable telecom sector in India.

“Although the sector has struggled for many years, we expect that 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 to the benefit of all citizens,” Read said.

Conglomerate Reliance Industries Ltd Chairman Mukesh D Ambani and Bharti Airtel Chairman Sunil Mittal also appreciated the reforms.

Bharti Airtel in a statement said the bold initiatives are reminiscent of the decisions taken by the NDA Government in 1999 when the telecom sector was at a crossroads which resulted in an era of affordable mobile services for all Indians.

“The latest reforms ensure that the industry is able to invest fearlessly and support India’s digital ambitions. We also compliment the Minister of Communications and the finance minister for their leadership and support,” Mittal said in a statement.

Bharti Airtel said the reform package heralds a new dawn for the Indian telecom industry and will catalyse explosive growth of this vital sector.

He further said the reforms pave the way for a sustainable three private plus one state-owned telecom operator structure to serve a large market like India.

Ambani said the latest reforms and relief measures will enable the telecom sector to achieve goals set under the Digital India mission.

“The telecom sector is one the prime movers of the economy and the key enabler for making India a Digital Society, 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. I thank Prime Minister (Narendra Modi) for this bold initiative,” Ambani said.

RIL’s telecom arm Jio said the government’s telecom sector reforms will encourage it to bring newer and greater benefits to the customers.

The Cabinet also allowed 100 per cent FDI (foreign direct investment) in the sector under the automatic route.

So far, up to 49 per cent was allowed through the automatic route and anything thereafter had to necessarily go through the government route. The latest measures are expected to ease the cash flow issues being faced by some players in the industry.

Spectrum user charges have been rationalised and there will now be an annual compounding of rates, instead of monthly. Spectrum can now be surrendered as well as shared.

Spectrum auction calendar will be created while tower set-up process is now simplified on the basis of self-approval.

The Cabinet has approved the allocation of spectrum through an auction for a period of 30 years, compared with the 20-year period prevalent at present.

“These fresh reforms will further boost our efforts to invest in this exciting digital future and enable us to be one of the leading players in India’s digital economy. More needs to be done, however, towards a sustainable tariff regime to ensure the industry gets a fair return,” Bharti Airtel India and South Asia MD and CEO Gopal Vittal said.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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