Vodafone Idea, Airtel, Reliance Jio must agree on stress for spectrum relief

Vodafone Idea has sought want spectrum-related payments to be spread over 18 years from the current 16 years, but Reliance Jio has opposed that proposal

Navadha Pandey
Updated6 Dec 2018
The telecom sector has been under financial stress since Reliance Jio unleashed the tariff war. Photo: Ramesh Pathania/Mint
The telecom sector has been under financial stress since Reliance Jio unleashed the tariff war. Photo: Ramesh Pathania/Mint

New Delhi: Telecom operators are unlikely to get any financial relief on spectrum-related payments due to the exchequer unless all three companies—Vodafone Idea Ltd, Bharti Airtel Ltd and Reliance Jio Infocomm Ltd—come together and agree that the industry is undergoing financial stress, a senior government official said requesting anonymity.

This comes after Vodafone Idea chairman Kumar Mangalam Birla last month met officials from the finance ministry and department of telecommunications (DoT) to discuss the firm’s pending spectrum-related liabilities. He had also flagged concerns on liquidity crunch in the sector.

This was followed by a letter from the Cellular Operators Association of India (COAI) to the DoT seeking financial relief.

Under present norms, an operator has to pay some amount at the time of purchase of spectrum. From the date of purchase, there is a two-year moratorium, after which the operator has to make the remaining payment over 16 years.

Vodafone Idea had sought increasing this period from 16 years to 18 years. But Reliance Jio has opposed that proposal, and hence there is no agreement among operators.

“The problem is that they are not able to come together as an industry and say there is stress,” the official said. “We could have initiated some action if they could come together. If one player is opposing everything, and two players are saying they want relief, then what will the government do”?

Vodafone Idea faces spectrum liabilities worth 3,000 crore due in March 2019 and an additional 12,000 crore due in mid-2019-2020, Credit Suisse said in a note dated 22 November.

The telecom sector is undergoing a fierce battle after the entry of Reliance Jio, which brought tariffs to the rockbottom. As a result of year-long consolidation among multiple operators, only two other private players are left: Bharti Airtel and the merged entity of Vodafone India and Idea Cellular.

Vodafone Idea posted 4,970 crore loss in the September quarter, while Airtel posted a 118 crore profit.

Meanwhile, the government has initiated action on the industry’s demand for reviewing import duties on telecom equipment. In October, the government raised basic customs duty on telecom equipment, including base stations and optical transport equipment, from 10% to 20%. Products that enjoyed zero percent import tax were slapped with a 10% customs duty.

“COAI had asked for import duties to be reviewed on telecom equipment. There’s a committee comprising of members of Department of Revenue, Ministry of Commerce and Industry, Ministry of Electronics and Information Technology and DoT which is looking into it,” the official said.

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