Let telecom firms use spectrum as collateral, Trai tells govt
Trai’s suggestion comes amid falling revenues and decline in telecom sector’s contribution to the exchequer
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New Delhi: The Telecom Regulatory Authority of India (Trai) has suggested that the government allow telecom companies to use spectrum as collateral for borrowing amid falling revenues and a decline in the sector’s contribution to the exchequer.
“That will assuage the stress of telecommunications as well as the banking sector,” Trai secretary Sudhir Gupta wrote in a letter to new telecom secretary P.K. Pujari on 29 March. A copy of the letter has been reviewed by Mint.
Trai also made a number of recommendations with respect to licence terms and conditions for different telecom services, the method of estimating revenue for levying licence fees and spectrum usage charges. It also called for an increase in the duration and number of instalments for payment of spectrum fee and the amount of Universal Service Obligation fee.
“The various recommendations, made after due public consultation with all the stakeholders, and a thorough analysis of the issues, in particular regarding easy payment option for the TSPs (telecom service providers), already address the concerns raised by Telecom Commission,” Gupta said in the letter.
He was responding to concerns expressed by the commission in February over the declining revenues of telcos, which, it said, was affecting their capability to discharge contractual commitments towards the government, financial institutions and banks. It also observed that the ongoing tariff war in the sector is one of the reasons for the firms’ worsening financial health.
It said that the licence fees paid by the telecom industry declined to Rs3,166 crore in the December quarter from Rs3,584 crore in the preceding three months. Spectrum usage charges declined to Rs1,553 crore from Rs1,820 crore during the same period.
It asked Trai to implement its decision on promotional tariffs issued in June 2002 and September 2008 in “letter and spirit”.
Trai’s 2002 order restricts the validity period of promotional offers to 90 days, while a 2008 order stated that all service providers need to state the eligibility criteria for such offers and the duration in which the offers are valid.
Gupta, in the letter, said the regulator “completely disagrees with the Commission’s suggestion that the Authority has not implemented its decisions/directions on promotional offers, either in letter or in spirit”.
“The economic purpose of telecom regulation is aimed to maximise the overall economic growth of the sector and increase productivity. Therefore, objectives of... the telecom policy should not be viewed only through the lens of maximisation of government revenue from the telecom service sector,” Gupta said.
Indian telecom companies are in the midst of a fierce battle to protect their turf after the entry of Mukesh Ambani’s Reliance Jio Infocomm Ltd, which has disrupted the market and turned the tide in favour of data through free offers in the beginning and later with ultra-cheap products that went on sale in the beginning of March.
To combat Jio’s rise, Vodafone India Ltd and Idea Cellular Ltd have proposed to merge to create India’s largest telco. Meanwhile, Bharti Airtel Ltd, the current market leader, is quietly bolstering its position by acquiring small but significant firms such as Telenor India and Tikona.
The intensity of the battle, indeed, has also involved the sector regulator and the central government, including the prime minister’s office.