The Union cabinet is expected to discuss a bailout plan for the struggling telecommunications sector on Wednesday, according to government sources. As part of the package, there could be some relaxation on the payment of taxes to the government, including a one-year moratorium on the spectrum payment due in April 2022.
Among other things, the Center has held several rounds of talks to encourage carriers to monetize their assets through InvIT and REIT instruments, an official from the Department of Telecommunications (DoT) said. The idea is to support telecom operators with sovereign insurance while they appeal to international investors. It could not be confirmed whether such a proposal would be submitted to Cabinet.
The Cabinet meeting is expected to consider other proposals, including those related to the textile production incentive (PLI) scheme and the minimum support price of the rabi crop. Regarding the monetization of assets, the DoT official said the government could send a comfort letter to telecom service providers to ease the process of securing funding from global investors.
For example, cash-strapped Vodafone Idea was unable to raise sufficient funds due to investor concerns. In such a case, the DoT comfort letter might help. “Since the tower assets can be treated in one way or another like real estate or infrastructure, companies can use these channels (InvIT and REIT) to raise funds. The comfort letter will serve as an assurance to investors that their money is safe in the business, “an informed official said. Commercial standard.
The decision, if approved, would apply to all telecommunications companies, but would immediately benefit Vodafone Idea. Following the buzz surrounding a telecoms bailout plan, shares of Vodafone Idea rose 14.48 percent to Rs 8.30 on BSE on Tuesday.
The practice of issuing a comfort letter began primarily for Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL) to help them obtain financing from banks.
Explaining other measures that could be considered, an official said license fees are paid in four quarterly installments, which the department may allow companies to pay annually. This could allow some telecommunications companies to reduce their debt in the coming quarters. A call can also be taken on the deferral of spectrum-related payments that companies pay, he said.
But the government also wants the UK-based parent company to inject capital into Vodafone Idea to keep the business afloat. The group resisted investing in the business, while maintaining that it wouldn’t throw good after bad money.
The government’s effort in preparing a telecom package is to ensure that the telecommunications sector does not become a duopoly.
Until a few years ago, the Indian telecommunications industry had several players, including several telecommunications operators and foreign investors. The numbers have dropped dramatically after many companies were forced to shut down as a result of the 2G spectrum allocation scam. Currently, it is a market of three private players: Reliance Jio, Bharti Airtel and Vodafone Idea.
The Supreme Court last September granted telecommunications operators 10 years for the installment of AGR money (adjusted gross income) while reaffirming the contributions levied by the DoT. But earlier this year, Bharti Airtel and Vodafone Idea moved the court by pointing out anomalies in the calculation of the total AGR dues which amounted to Rs 43,000 crore for Bharti Airtel and Rs 58,000 crore for Vodafone Idea.
Vodafone Idea reduced its net loss by 71% to Rs 7,319 crore in the first quarter of fiscal 2022 on an annual basis due to lower one-off expenses. During the same period last year, it had recorded a net loss of Rs 25,460 crore due to the provisioning of the adjusted gross income liability.