Relief for telecom sector, Cabinet approves 4-year moratorium on AGR dues

NEW DELHI: In a much-needed relief for the cash-strapped telecom sector, the Union Cabinet on Wednesday approved a 4- year moratorium period on dues and rationalised the definition of adjusted gross revenue (AGR).
The announcement comes as a big relief to companies like Vodafone Idea which had to pay thousands of crores to the Centre in unprovisioned past statutory dues.
Briefing the media after the Union Cabinet meeting, telecom minister Ashwani Vaishnaw said that the reforms will change the framework of the entire telecom sector and broaden the industry.
The relief measures include the following:
* Four-year moratorium on payment of statutory dues by telecom companies, both AGR and spectrum charges
* Definition of AGR has been rationalised by excluding non-telecom revenue of telecom companies
* 100 per cent FDI (foreign direct investment) in telecom via the automatic route has been approved

* The regime of heavy interest, penalty and interest on penalty on payment of licence fees, spectrum charges and all kinds of charges has been rationalised .
* The Centre will do annual compounding of interest instead of the monthly compounding.
* Spectrum auction will be done for 30 years, instead of 20 years. After completing 10-years lock-in period, the buyer will have the option to surrender by paying surrender charges.
* Spectrum sharing has been completely allowed and made free.
Relief for Vodafone Idea
Bharti Airtel and Reliance Jio said the measures will boost growth in the telecoms industry. Vodafone Idea's owners, Britain's Vodafone Group and India's Aditya Birla Group, said the reforms will help unshackle the telecoms sector.
The government's move comes as a relief for debt-ridden Vodafone Idea which has already paid the government Rs 7,854 crore ($1.07 billion) in telecoms dues, but still owes roughly Rs 50,000 crore.
The new measures will likely ease the cash crunch at Vodafone Idea.
Shares in Vodafone Idea rose 2.9% on the news, while Bharti Airtel closed 4.5% up in a broader Mumbai market that closed 0.8% higher.
"It's a relief but not a lifesaver because of (Vodafone Idea's) weak business profile," Fitch Ratings senior director, Nitin Soni, said.
"It's unlikely to salvage the company's competitive position."
Vodafone Idea has been steadily losing subscribers in recent months, with over four million customers exiting the network in June, according to data from the Telecom Regulatory Authority of India.
With a market share of 23 percent in June 2021, Vodafone Idea now lags behind Airtel and Reliance Jio in the competitive Indian market of 1.3 billion people.
In September last year, the Supreme Court had granted 10 years to the telecom companies to clear their AGR dues of around Rs 1.43 lakh crore to the Centre.
(With inputs from agencies)