India’s federal cabinet on Wednesday approved an aid package for its cash-strapped telecommunications sector, including a four-year moratorium on over-the-air payments owed to the government, the country’s telecommunications minister said.
The deferred payment cycle will begin in October. On January 1, Telecom Minister Ashwini Vaishnaw told a press conference, awarding debt-ridden Vodafone Idea, which previously said it risked closure without government help, more than time to pay his bills. rights.
Shares of Vodafone Idea rose 2.9% on the news, while Bharti Airtel closed 4.5% in a larger Mumbai market which closed up 0.8%.
Bharti Airtel and Reliance Jio said the move will boost growth in the telecommunications industry. Vodafone Idea did not respond to a request for comment.
India’s telecommunications industry struggled in late 2016 with the entry of billionaire Mukesh Ambani Reliance Jio, triggering a price war that forced some competitors out of the market and turned profits into losses.
Vaishnaw said the government was changing the controversial definition of Adjusted Gross Income (AGR) to only count telecommunications revenues.
India has long argued that even non-telecom corporate revenues were part of the AGR, which led to a lengthy legal battle that culminated in 2019 with the Supreme Court on the side of government opinion and led to a hefty bill of around $ 13 billion for wireless operators. .
All telecommunications reforms will apply in the future and not retroactively, Vaishnaw said, which means Indian operators have yet to settle billions of dollars in unpaid AGR payments to the government.
Respect for the idea of Vodafone
The measures, which also include a four-year deferral in the payment of AGR contributions, will likely ease the cash flow crisis at Vodafone Idea.
The Supreme Court had ordered companies to adjust AGR quotas by 2031.
Vodafone Idea, a combination of the Indian unit of UK group Vodafone and national telecommunications company Idea Cellular, has paid the government $ 1.07 billion (78.54 billion rupees) in AGR installments, but still owes around 500 billion dollars.
It has a net debt of 1.91 trillion rupees and the resignation of its billionaire president last month has raised fears that India is left with just two major operators.
On Wednesday, Vaishnaw said the government did not want a duopoly.
“We believe that there must be healthy competition in the sector. And for that, there will be more reforms when the 5G spectrum is auctioned … so that more and more players can enter this sector” , Vaishnaw said.
Bharti Airtel said he paid an estimated fee of Rs 180 billion and government figures show he still owes Rs 259.76 billion.
India’s latest operator, Reliance Jio, has already paid its small share of AGR fees.
The cabinet also authorized 100% of foreign direct investment in the sector through the automatic channel, said Vaishnaw, a move that will allow easy investment in the sector without independent government approvals.
The measures announced in the telecommunications package include increasing the duration of occupation of radio waves in the hands of companies to 30 years against 20 years currently, the elimination of the license fee for the use of radio waves acquired at future auctions and totally free spectrum sharing for operators, Vaishnaw mentioned.
“The relief comes just in time and, at the very least, it will help telecommunications companies navigate the market,” said Sonam Chandwani, managing partner at KS Legal & Associates law firm.