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Saturday, December 14, 2019

Under strain: ‘No formal proposal yet from telcos on relief package’

Need to review issues in totality and in comprehensive manner: Telecom Secretary

By: ENS Economic Bureau | New Delhi | Published: November 22, 2018 8:08:32 am
Under strain: ‘No formal proposal yet from telcos on relief package’ The demand for a relief package picked up momentum as it was learnt that Vodafone Idea chairman Kumar Mangalam Birla met ministers and senior officials in the ministries of finance and telecom earlier this month regarding the liquidity crunch and high annual spectrum payments. (File)

Even as demands are being raised in favour of a relief package by financially struggling telecom operators, Telecom Secretary Aruna Sundararajan on Wednesday said that no formal proposals regarding the same have been submitted by the industry. She, however, said that the issue requires comprehensive review.

“We have not got any formal proposal from them (telecom operators). Let such a proposal come. We need to review this in totality and in a comprehensive manner,” Sundararajan said.

The demand for a relief package picked up momentum as it was learnt that Vodafone Idea chairman Kumar Mangalam Birla met ministers and senior officials in the ministries of finance and telecom earlier this month regarding the liquidity crunch and high annual spectrum payments at a time when the industry is passing through a phase of hyper-competition spurred by rock-bottom mobile tariffs, leading to severe margin pressures on telcos’ balance sheets.

It is believed that Birla sought government’s help in form of some sort of relaxation in taxes and dues which the industry pays on a quarterly basis to the Department of Telecommunications (DoT).

On November 14, Vodafone Idea posted a consolidated net loss of Rs 4,974 crore during the July-September quarter, underlining once again the financial stress operators are undergoing due to below-cost tariffs leading to customers migrating to lower average realisation per user (ARPU) offerings. Competitive pressure on the sector since the commercial launch of Reliance Jio leading to a tariff war also reflected in earnings of the India business of another major player, Bharti Airtel, which reported a net loss of Rs 1,646 crore during Q2 FY19, wider than the Rs 940-crore loss it had posted in the preceding quarter.

A senior DoT official said discussions on the current state of the sector are common between the government and the industry. “But for any concrete action on them, they (industry) have to make a formal representation, which has not happened after we accepted the IMG recommendations in March. It was concluded that the industry is facing an interim liquidity stress and if the industry feels this is not the case, a fresh exercise would have to be undertaken, which will take time as we will have to consult finance and other ministries,” he explained.

In March, the government had approved IMG’s recommendations for allowing operators to opt for a one-time higher number of instalments (maximum 16) for deferred payment liabilities on spectrum acquired in auctions conducted since 2012. Besides, it also approved the removal of the intra-band cap of 50 per cent spectrum holding by an operator in a circle, and instead allowed an operator to have not more than 50 per cent of all the sub-1GHz band like 700, 800, and 900 Mhz put together. The proposal to allow operators to hold 35 per cent of the total spectrum assigned in a circle against the current cap of 25 per cent was also cleared.

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