IBA suggests steps to ease financial stress on telecom firms
Indian Banks’ Association has suggested to the govt that it refund telecom firms any excess upfront payment made for surrendered spectrum and scrap deferred spectrum payment liabilities
New Delhi: Indian Banks’ Association (IBA) has sought to ease the financial stress on telecom companies by suggesting to the government that it refund operators any excess upfront payment made for surrendered spectrum and scrap deferred payment liabilities related to the airwaves.
“This money will be used for repaying the banks, which in turn prevent loans from turning into NPA (non-performing assets),” IBA’s chief executive V.G. Kannan said in a letter to telecom secretary Aruna Sundararajan on 29 November.
Kannan cited similar arrangements being made for state-run Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd as precedents for such provisions for the private telecom companies.
According to Indian Banks Association estimates, the total liabilities of the telecom sector stood at Rs7.75 trillion as of 31 March, of which bank borrowings and liabilities towards spectrum payment to the telecom department stood at Rs5.80 trillion.
Companies in the telecom sector have been battling pressure on margins and revenue streams after the entry of Reliance Jio Infocomm Ltd in September last year, which after offering free services for almost seven months announced an intense tariff war by way of rock-bottom data prices.
The current stress in the sector has also forced beleaguered Reliance Communications Ltd to shut its 2G and 3G business and focus only on 4G.
Reliance Communications had in June managed to secure a seven-month standstill on servicing its debt.
The debt repayment was contingent on its proposed merger with Aircel’s India wireless operations and stake sale in tower business to Brookfield Infrastructure.
After its merger with Aircel fell through, the company in October presented a fresh debt repayment plan to its creditors under which it aims to raise Rs27,000 crore through sale of assets including spectrum, real estate and towers.
“As per current norms, if an operator surrenders spectrum, the government does not owe it any money. Moreover, despite surrendering spectrum, it is still liable to pay all future instalments related to the spectrum purchase,” a regulatory officer at a telecom operator said.
Taking cognizance of the stress in the sector, the Telecom Commission in September approved measures such as giving operators six more years to pay for spectrum purchases and lowering their interest burden on penalties related to payment of spectrum usage charges and licence fee.
The measures, which were in line with the recommendations of an inter-ministerial panel, are yet to be approved by the Union cabinet.
The Telecom Commission had at the time also sought the Telecom Regulatory Authority of India’s (Trai) recommendations on revising spectrum caps for operators.
Trai, last month, sent its recommendations to the government suggesting the overall spectrum cap per operator be revised to 35% from the current limit of 25%.
The telecom regulator has also suggested that the current intra-band cap should be removed and instead, there should be a cap of 50% on the combined spectrum holding in the 700MHz, 800MHz and 900MHz bands.
As per current provisions, an operator can hold up to 25% of the total spectrum assigned across all bands and 50% within a given band in each of the service area.
Trai’s recommendation would be reviewed by a committee in the department of telecommunications.
The Indian Banks Association, in its letter, has also requested the government to return the bank guarantees in respect of such spectrum submitted by operators back to them without being encashed.
This, Kannan said, would help free up working capital lines for operators.
- Telecom Commission likely to discuss Trai’s proposal on spectrum allocation on 31 August
- 200 stressed account under RBI scanner
- Canara Bank to hire social media agency for customer outreach
- Solar tariffs touch Rs 2.59 per unit in NTPC’s tender
- RIL, BP spend over ₹7,000 crore to prolong output from gas fields in KG basin
Editor's Picks »
- DGCA advises airlines not to overprice air tickets to Kerala
- Tech, not Turkey, proves catalyst behind global sell-off
- Why Zuckerberg buying Messi’s magic on TV is a perfect game for Facebook
- Tencent stuns with first profit drop in a decade
- Proxy advisory firm seeks change in voting rules for related-party transactions