Saturday, 19 January, 2019

Mobile Carriers Can Hold More Spectrum; Payment Norms Eased

Cabinet relief package for telecom sector to attract investment enhance ease of doing business Mobile Carriers Can Hold More Spectrum; Payment Norms Eased
Nellie Chapman | 08 March, 2018, 21:36

The overall cap increases from 25 to 35 percent of available frequencies. "Extending the time period for spectrum payments is good from cash flow perspective but it does not fix the real issues of the industry which has to pay nearly 30% of its revenues as levies to the government", said Rajan Mathews, director general of Cellular Operators Association of India (COAI), an industry body.

The telecom ministry has given one-time opportunity for mobile service providers to opt for up to 16 installments apart from now permitted 10 installments.

"With the restructuring of the deferred payment liability, the cash flow for the telecom service providers will increase in the immediate timeframe providing them some relief", the government said.

The Cabinet has also given telcos the option to extend the time period for payment of spectrum bought in auction to 16 years from the present 10 years.

The revised limit for spectrum holding may also encourage their participation in future auctions. It also scrapped a rule that restricted operators from holding more than 50% spectrum in a single band in a circle.

Indian telecom regulator TRAI had recommended revision in the existing limits of cap for spectrum holding taking into consideration the technological advancement, efficient use of spectrum, measures to facilitate consolidation etc. This is likely to help with the cash flow in the short to medium term, while adding Rs. 74,446 crore till 2034-35 to the government's kitty due to no reduction in interest rates. Instead, it suggested that there should be a cap of 50 per cent on the combined spectrum holding by a telecom operator in the sub-1GHz bands of 700MHz, 800MHz and 900MHz.

It has also relaxed the spectrum holding limit for the telecom operators, according to an official spokesperson. The sector is in under financial stress due to increasing pressure after the entry Mukesh Ambani-led Reliance Jio with free services and cheap data offers.

Niren Patel, partner, Khaitan & Co, said: "Telecom operators will be able to trade in excess (subject to the prescribed time limit) as well as the current spectrum held by them with other telecom operators depending upon their current spectrum holdings".

The Cabinet has also chose to restructure the deferred payment liabilities of TSPs for spectrum, a government statement said. However, BSE Telecom index had rallied 49.47% a year ago while Bharti Airtel and Idea Cellular gained 73.37% and 45.85% respectively.