How will telecom reforms package impact the industry? Govt issues FAQs

 The telecom reforms package will help companies sustain their business amid the crisis brought by the Covid-19 pandemic, the central government said on Wednesday while issuing FAQs regarding the new move. 

Further, it also clarified that the companies will not become public sector firms after the interest dues are converted into equity stake for the government.

Debt-ridden Vodafone Idea (VIL), Tata Teleservices and Tata Teleservices Maharashtra have proposed to convert interest liabilities payable to the government into equity.

VIL board has proposed to allocate 35.8% shares and Tata Teleservices Maharashtra around 9.5% stake to the government.

The government said that it is not paying anything to acquire the shares of any telecom service provider. 

“Certain dues payable by some of the TSPs are being converted to equity/preference capital in these Companies based on options exercised by them as per the Telecom Reforms Package announced on September 15th 2021,” it said. 

On the question of how shares are being acquired in the three companies, it said: “The telecom sector has gone through a long period of litigation. As a result, all the telecom companies have high amounts of liabilities which have arisen due to various legacy issues. These legacy issues have put the Indian telecom industry under stress.”

Due to this, the government said it has approved many structural and procedural reforms in September 2021.

“As a part of these reforms, the TSPs were given the option to convert some certain interest liabilities owed to the government into equity/preference shares in favour of the government,” it said. 

“While some companies have opted not to convert their liabilities into equity/preference shares, three companies have exercised the option of converting liabilities into equity/preference shares. They have offered this option to government in lieu of their liabilities,” it added. 

Government can sell these shares at an appropriate time and thereby receive the amounts due.

It said the new reforms will “stop a scenario where there are very few players in the market. Such a potential lack of competition could lead to higher prices and poor services. Enough competition in the market safeguards the interests of the common man.”

“With the conversion of liabilities into equity/preference shares, the sector has got back the ability to invest and provide better services. Companies also retain the ability to invest so that telecom services can reach far-flung areas,” it said. 

Meanwhile, telecom minister Ashwini Vaishnaw had said earlier in the day that the present and future debt liabilities will continue to remain with telecom companies that have proposed to convert their interest dues into equity stake for the government. 

"Government will remain an investor only. The companies will be run by the professionals. All the debt liabilities will remain responsibility of the companies. The companies have given us commitment," Vaishnaw was quoted as saying by news agency PTI.