Telecom sector: Inter-ministerial group to meet next week to finalise report
New Delhi: A panel of ministers formed to assess the stress in the telecom sector will meet on 14 and 16 August to finalise its report.
According to an office memorandum by the department of telecommunications seen by Mint, the department will circulate the draft report by the inter-ministerial group on the sector on Wednesday.
Aruna Sundararajan, secretary, department of telecom (DoT) could not be contacted for comments immediately.
The inter-ministerial group (IMG) was formed in May to assess issues plaguing the viability and loan repayment capacity of telecom companies, which seem to have deteriorated especially after the launch of Mukesh Ambani-promoted Reliance Jio Infocomm Ltd. Jio disrupted the market initially with its free services and proceeded to offer relatively cheaper schemes. In his second blow to the industry, Ambani unveiled JioPhone, a feature phone with 4G services.
Jio’s moves have forced market’s second and third largest telcos, Vodafone India Ltd and Idea Cellular Ltd, to merge. India’s largest telecom service provider Bharti Airtel has tactfully handled Jio’s attack through bundled offers and strategic moves such as acquisition of Telenor’s India operations and strategic stake sale in its tower unit Bharti Infratel Ltd.
Smaller companies such as Reliance Communications Ltd and Aircel Ltd have suffered the most, with Anil Ambani-promoted firm has time till December to repay loans to its lenders.
RCom plans to sell its tower business to Brookfield Asset Management Inc. for Rs11,000 crore. It plans to spin off its wireless unit and merge it with Aircel Ltd, which will result in Rs14,000 crore getting transferred to the merged entity.
This will remove Rs25,000 crore of debt from the books of RCom, which has total debt of around Rs45,000 crore. The debt reduction of 60% “will be the largest ever debt reduction by one company in the history of India”, according to Anil Ambani.
The IMG was tasked to furnish recommendations for resolution of stressed assets, policy reforms and strategic interventions for the telecom sector in three months.
The telecom companies have a cumulative debt of Rs4.6 trillion and they have approached the government for reduction of levies like licence fee, spectrum usage charge and the goods and services tax.
To be sure, as part of a bailout package, the finance ministry is considering relaxing some of their payment obligations, on the logic that a robust sector is good for government finances as well.
Telecom firms start paying for spectrum two years after an auction, and pay over eight years, along with interest. Companies have been seeking an increase to 16 years, and a shift to marginal cost of funds-based lending rate (MCLR) on interest payments. MCLR is a system of interest rate computation introduced by the Reserve Bank of India (RBI) from April 2016 to reflect the latest cost of funds.