100% FDI In Telecom Sector Allowed By Govt; Telcos Need Not Pay Loan For 4 Years!


The moratorium will start from October 1.

The Union Cabinet has approved a relief package for the telecom sector along with several structural reforms.

The nine structural reforms and five procedural reforms will serve to strengthen the country’s cash-strapped telecom sector.

AGR Moratorium

These include a 4-year moratorium with an interest rate of MCLR +2% on AGR dues.

The telecom operators’ deferred spectrum dues was estimated at Rs 96,270 crore, AGR dues at Rs 58,400 crore.

It is also modifying the definition of Adjusted Gross Revenues (AGR) along with a reduction in spectrum usage charges.

Non-telecom revenue won’t be included in AGR definition prospectively.

Minister Ashwini Vaishnaw announced that those who will avail of the moratorium will have to pay some interest.

The moratorium will start from October 1.

Encouraging Competition

It will also ensure healthy competition which is extremely important for the telecom industry and towards consumers.

It addresses the concerns over a duopoly emerging with just two major telecom players — Bharti Airtel and Reliance Jio.

To that end, there will be more reforms in the horizon regarding 5G auction which will bring in more players in the sector.

Vodafone 

This development comes after Kumar Mangalam Birla stepped down from his post in Vodafone Idea Limited as chairman.

Vodafone, which was created from the merger of British telecom giant Vodafone’s India unit and Birla’s Idea Cellular Ltd, has to pay about Rs 50,399.63 crore in statutory dues dating back over the past many years.

The moratorium on payments for airwaves is aimed at helping Bharti Airtel, Reliance Jio and Vodafone Idea.

In response to the news, shares in wireless carriers Bharti Airtel rose 5.4% and Vodafone Idea went up 2.9%.

Other Significant Measures

The telcos also have an option to convert interest on spectrum dues of the four-year moratorium period into government equity.

Other measures approved by the Cabinet include those regarding spectrum allocation and FDI.

Spectrum sharing is now free while the auction will take place in the final quarter of the financial year.

FDI In Telecom

100% FDI in telecom via automatic route is approved by Cabinet, from the existing limit of 49%.

This will improve ease of doing business and will pave the way for large scale investments into the sector.

The investments in 5G technology deployment would also generate more jobs.

A Welcome Move

Sunil Bharti Mittal, chairman, Bharti Airtel has praised the government’s decisions and said that the latest reforms will “ensure that the industry is able to invest fearlessly and support India’s digital ambitions”.

He added that the relief package will lead to “explosive growth of this vital sector”.

It also paves the way for “three private plus one state owned telecom operator structure to serve a large market like India”.

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