Telecom Commission rejects Reliance Jio’s demand

The Telecom Commission (TC) has asked the inter-ministerial panel looking into the health of the telecom sector to consider ways for giving greater and immediate relief to telcos, which are facing high debt levels and falling revenues, said a senior government official.
The unexpected move by TC – the highest decision-making body in the telecom department (DoT) – gives hope to India’s older telcos such as Bharti Airtel, Vodafone India, Idea Cellular, Reliance Communications and Tata Teleservices. They had been disappointed by the panel’s suggestions of just extending the fee-payment tenure for auctioned airwaves to 16 years from 10 years and lowering interest rates payable on unpaid dues. New entrant Reliance Jio, which has disrupted the telecom sector with rock-bottom tariffs, has opposed any relief.
The inter-ministerial group (IMG) was set up in June. Officials aware of the details of the recent TC meeting said that the ministry is of the opinion that merely prolonging the tenure of payment may not alleviate stress in the short term for the telcos.
Some TC members were also of the view that a financially distressed telecom sector was not in the best interest of the government either, as the telecom is a major revenue contributor to the national exchequer.
India’s older phone companies owe nearly Rs 5 lakh crore to their lenders. They have had to significantly lower their tariffs after the entry of Reliance Jio last September and their revenues and profits have fallen steadily over the last three quarters.
“The IMG has been asked to come back with clarifications, one of which is whether immediate relief can be given now and how can that be done,” said an official who did not wish to be named.
The IMG is supposed to revert with its clarifications and suggestions in two weeks. The telecom commission is expected to meet again on September 29 to take a decision on the IMG’s recommendations, which will then need Cabinet approval.
The IMG has rejected industry’s major demands of lowering licence fees and spectrum usage charge. The extension to the tenure of auction payments and shifting from the prime lending rate (PLR) to the marginal cost of fund-based lending rate (MCLR) for interest and penalty payments on licence fees and the spectrum usage charge (SUC), have been termed inadequate by the incumbents who have lobbied hard for greater relief, citing falling tariffs, declining profits, rising debt and substantial investment commitments.
In letters to telecom minister Manoj Sinha as well as the Prime Minister’s Office, dated August 22, Vodafone Group chief executive Vittorio Colao had expressed the hope the IMG will recommend a reduction in the interest rate for deferred spectrum payments to 6.25% from over 9%, besides an increase in the period of these payments.
The IMG, in its recommendations submitted early September, though didn’t accede to Colao’s call for lowering the interest rate on auction payments.
Prashant Singhal, telecom, media and technology leader for emerging markets at EY, said that waiving interest, or charging marginal interest, on the deferred payments would provide immediate relief to carriers.”In terms of immediate relief, the government should grant an additional moratorium of two years but without levying any interest,” he added.
The interest waiver on deferred spectrum payments could help telcos save around Rs 30,000 crore annually. Industry body Cellular Operators Association of India on Tuesday reiterated that the government should reduce SUC to 1% and licence fees to 3%, with a gliding path to 1%.