Editorial – September 2021

The government has unveiled comprehensive reforms in telecom. It is investment friendly, provides liquidity relief, procedural ease and reduces regulatory load for telcos.

Applicable from prospective dates, the reforms overhaul spectrum acquisition and usage charges. Though spectrum will continue to be awarded through auctions, the duration will be for 30 years instead of 20 years as has been the practice. In future auctions, operators will have the option to surrender the acquired spectrum subject to a lock-in period of 10 years. Operators will not be required to pay SUC for spectrum so acquired. For the existing spectrum allocations, the minimum 3 pc weighted average SUC rate has been taken off, allowing weighted SUC payment to be lower than 3 pc for a TSP. Additional levy of 0.5 pc SUC for spectrum sharing has gone. These revenue reduction measures will also ease the liquidity situation for the operators.

Another relaxation in relation to existing spectrum is, telcos can surrender their existing spectrum by paying nominal surrender fee. The spectrum purchase dues for the remaining period will not be payable. This provision is at high-risk of being misused and government should be watchful. Scenarios may emerge of telcos purchasing new spectrum in future auctions which has 30 years validity and zero SUC, and surrendering their existing spectrum of 20 years validity that comes with SUC levy. In this manner, they will repurchase the surrendered spectrum in future auctions for 30 years and zero SUC.

Vodafone Idea had been demanding conversion of deferred spectrum and AGR dues into equity, this has been accepted. Now, a telco can defer dues by four years. For the deferred period, a telco has to pay interest protecting ‘net present value’ of the liability. For this interest payment also, a telco will have the option to ask the government to convert it into equity. Alternatively, it can pay the interest once the deferment period is over. At the end of the moratorium period, if a telco’s liquidity situation is still uncomfortable, it can ask the government to convert into equity the entire dues of AGR, spectrum and interest.

There are also reforms pertaining to AGR definition, interest regime, bank guarantees, FDI and administrative processes. It is a topped-up package. Now it is upto the telcos to deliver or keep demanding more!