Telecom reforms to usher in new era for India digital ambitions, to boost funding: Industry players

The telecom reforms announced by the government on Wednesday are the beginning of a new era for the sector and will boost investment in the industry that is reeling under debt burden, according to industry players.

Vodafone Idea, the player under severe crisis, also lauded the decision with its promoter Aditya Birla Group Chairman Kumar Mangalam Birla calling the reform measures "path-breaking" that will go a long way in "unshackling the telecom sector".

"These reforms demonstrate the government's firm commitment to ensuring healthy growth of the industry. The measures also reflect the decisiveness of...the government to address long-standing issues," Birla said.

In June, Birla had written to the government that investors are not willing to invest in the company in the absence of clarity on AGR liability, adequate moratorium on spectrum payments and most importantly floor pricing regime above the cost of service.

VIL has an adjusted gross revenue (AGR) outstanding liability of Rs 50,399.63 crore. Its gross debt, excluding lease liabilities, stood at Rs 1,80,310 crore as of March 31, 2021. The amount included deferred spectrum payment obligations of Rs 96,270 crore and debt from banks and financial institutions of Rs 23,080 crore apart from the AGR liability.

Also read: Cabinet decisions 'watershed moment' for telecom sector: PM Modi

Bharti Airtel's net debt at the end of the June 2021 quarter stood at over Rs 1.59 lakh crore.

Vodafone Group CEO Nick Read said, "Although the sector has struggled for many years, we expect that the government's constructive initiative announced today...will be the beginning of a new era for India's digital ambitions."

Bharti Airtel in a statement said the bold initiatives are reminiscent of the decisions taken by the NDA government in 1999 when the telecom sector was at a crossroads which resulted in an era of affordable mobile services for all Indians.

Bharti Airtel Chairman Sunil Bharti Mittal said, "The latest reforms ensure that the industry is able to invest fearlessly and support India's digital ambitions."

Bharti Airtel India and South Asia MD and CEO Gopal Vittal said more needs to be done towards a sustainable tariff regime to ensure the industry gets a fair return.

RIL Chairman Mukesh D Ambani said, "The telecom sector is one of the prime movers of the economy and the key enabler for making India a digital society. I welcome the Government of India's announcement of reforms and relief measures that will enable the industry to achieve the goals of Digital India. I thank Prime Minister (Narendra Modi) for this bold initiative."

ICRA Corporate Ratings Senior Vice-President and Group Head Sabyasachi Majumdar estimates that the moratorium on AGR dues provides an annual cash flow breather of around Rs 14,000 crore for the industry, while the moratorium on spectrum dues gives another Rs 32,000 crore of annual cash flow relief for the industry as a whole.

COAI Director General S P Kochhar said, "These steps would go a long way in relieving the financial stress the sector is facing, boosting investments, encouraging healthy competition and in offering choice to customers."

CII Director General Chandrajit Banerjee said the reforms will go a long way in restoring the sector's financial stability and ensuring healthy competition and strong players.

FICCI also said India is the world's second-largest telecommunications market with a subscriber base of 1.16 billion and has registered strong growth in the last decade.

"Given the crucial role of the telecom sector, this is a welcomed step towards reigniting the spark among the telcos," FICCI added.

Telecom Equipment and Services Export Promotion Council (TEPC) Chairman Sandeep Aggarwal said, "We need support from the government and private players to use 'Made In India' products. Unless the domestic sector uses Indian technology and products, 'Made In India' cannot succeed and find a market overseas."

Digital Infrastructure Providers Association Director General T R Dua said, "This initiative shall not only boost the proliferation and penetration of broadband and telecom connectivity but also boost the creation of robust digital infrastructure in the country," .

Telecom Equipment Manufacturers Association of India (TEMA) Chairman Emeritus N K Goyal said, "For the first time since independence, during 75 years of Azadi ka Amrit Mahotsav, Indian designed, developed and manufactured 4G and 5G will be deployed in private and PSU (public sector undertaking) telecom operators networks. We believe this should be a road map for 6G also."

Law firm J Sagar Associates partner Akshat Jain said that the deferment for AGR dues cannot be construed as waiver since the package only envisages a moratorium of four years on such AGR dues from October 1, 2021, with the interest and penalties accruing for such deferral.

KS Legal & Associates Managing Partner Sonam Chandwani said, "This will give troubled telecom carriers like Vodafone Idea much-needed breathing room as they pay crores of rupees in unprovisioned previous statutory dues."

The Cabinet on Wednesday approved a big-bang relief package for the stressed telecom sector that includes a four-year break for companies from paying statutory dues, permission to share scarce airwaves, change in the definition of revenue on which levies are paid and 100 per cent foreign investment through the automatic route.

The measures, aimed at providing relief to companies such as Vodafone Idea that have to pay thousands of crores in unprovisioned past statutory dues, also include the scrapping of spectrum usage charge (SUC) for airwaves acquired in future spectrum auctions.

It also provides telecom companies with an option to pay the interest amount arising due to the deferment of payment by way of equity.