Relief for Telecom Employees: Cabinet gives nod to a two-year moratorium on spectrum payments

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In a major relief to Telcos, the government has approved 2 years moratorium on spectrum payment. The Telcos were seeking relief from the government since the payment was huge.

According to ET Telecom “In view of the current financial stress faced by major telecom service providers and in pursuant of the recommendations by the Committee of Secretaries (CoS), it is decided to defer receipts of spectrum auction instalments due from the TSPs (telecom service providers) for the years 2020-21 and 2021-2022,” finance minister Nirmala Sitharaman said at a press briefing after a Cabinet meeting.

Thus, Vodafone Idea, Bharti Airtel and Reliance Jio would need to make the next spectrum payment to the government only in fiscal 2022-23.

This Approval will give immediate relief of more than ₹42,000 crores to India’s three mobile phone companies, two of which -Bharti Airtel and Vodafone Idea have been struggling with high debt and huge losses amid brutal competition.

According to one of the experts “Sanam S. Munot, Senior Associate, BDO in India “ Cabinet announcement of a two-year moratorium on the retrospective AGR levy on telcos is a net positive for the following reasons:

  • Major telcos namely Vodafone Idea and Bharti Airtel have been reeling under the pressure of unsurmountable debt (debt levels for these telcos before the entry of R Jio was ~ 20% of current levels). With debt burdens only rising, this new twist in terms of AGR levy would have led to dire consequences.
  • R Jio could have easily used this opportunity to monopolize (virtually) this game had this announcement not been made. What it does is, provide a level playing field (albeit for 2 years).
  • This could also provide an impetus to the resolution of R Com.
  • The only negative I foresee is on the economic front. With corporate tax cuts, relief measures for slowdown and moratorium for telcos on AGR levy, will the GoI be able to maintain fiscal discipline in FY20?

The government’s this move will save 40,000 telecom jobs which are at risk after the Supreme Court’s verdict asking telcos to pay up Rs 92,641 crore to the department of telecom (DoT) over the AGR (adjusted gross revenues) dispute.

Read more– 40,000 telecom jobs at risk over the next six months https://sightsinplus.com/2019/10/30/40000-telecom-jobs-at-risk-over-the-next-six-months/

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