India relief package for telecom sector |
India relief package for telecom sector
The India government has finally offered a lifeline to crisis-ridden Vodafone Idea and also respite to other private telecom operators. The Indian Cabinet chaired by Prime Minister Narendra Modi on 15 September cleared the much-awaited relief package for the sector which includes a moratorium on payment of spectrum dues. Information Technology and Communication Minister Ashwini Vaishnaw said a four-year moratorium has been given for all dues of telecom service providers. These are expected to protect and generate employment opportunities, promote healthy competition, protect interests of consumers, infuse liquidity, and encourage investment and reduce the regulatory burden on Telecom Service Providers (TSPs). Among the reforms, the Cabinet also approved 100 per cent FDI through an automatic route in the telecom sector. The minister said while 100 per cent of FDI was allowed earlier as well, only 49 per cent could come through the automatic route. Among the three private telecom players, Vodafone Idea Ltd (VIL) is facing an existential crisis and its closure would mean duopoly in the industry besides a considerable bearing on its employees, subscribers, banks and associated industries. Kumar Mangalam Birla, ex-Chairman of Vodafone Idea, had earlier written to the Cabinet Secretary offering his stake in the company to the government or any entity approved by it for free. He later quit as Chairman of the debt-laden telco. Vodafone Idea had a total debt of Rs 190 thousand crores as of June 30 which includes deferred spectrum payment obligations of 106 thousand crores and an adjusted gross revenue liability of Rs 62,180 crore. Another major player Bharti Airtel has also been under financial pressure. The company’s Chairman Sunil Mittal recently said that there is “tremendous stress in the telecom sector” and tariffs need to go up soon. The package is also expected to boost 4G proliferation, infuse liquidity and create an enabling environment for investment in 5G networks.
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