DoT likely to set up panel for preparing telecom sector relief package: Report

The Department of Telecommunications may reportedly appoint an external consultant or set up a panel for preparing a relief package for the telecom sector.

The telecom department is likely to consult an external agency for the revival package that is also expected to benefit debt-laden Vodafone Idea Limited, according to a report by Business Standard.

The package is expected to include reduction of bank guarantees, removing or reducing levies such as license fees and spectrum usage charges (SUC), redefining adjusted gross revenue (AGR) to exclude non-telecom items, amongst others.

It is worth noting that the Central government had sought inputs from IIM-Ahemadabad and Deloitte for the state-run Bharat Sanchar Nigam Limited (BSNL)’s revival package.

“Consultations with these bodies help us evaluate the options better,” an official told the publication.

Vodafone Idea, which was formed in August 2018 by a merger between Aditya Birla Group (ABG) unit Idea Cellular and UK-based Vodafone Group’s India unit, Vodafone India, faces a potential Rs 23,500 crore shortfall in cash flows in FY23.

Its March-end cash balance stood at Rs 350 crore.

Meanwhile, it has also been trying to raise Rs 25,000 crore for over 10 months but hasn’t been successful so far. Its attempts at reducing the AGR bill by all legal means have not yielded any positive results either.

On the other hand, VIL’s lenders led by State Bank of India (SBI) last Friday told DoT that converting the debt of cash-strapped telco to equity is one option to get the banks out of the precarious position.

As of March-end, Vodafone Idea owed Rs 1.57 lakh crore to the government, including Rs 96,270 crore towards spectrum payments and the rest towards its adjusted gross revenue (AGR) liability.

In comparison, banks have a total exposure of a little over Rs 35,000 crore, of which the funded exposure amounting to Rs 13,800 crore is under the risk of default, lenders said.

The remaining is non-funded exposure in the form of bank guarantees to DoT, which is not under imminent threat unless the department draws down on them, which is unlikely. The telco also has another Rs 7,500 crore in debt in the form of non-convertible debentures.

SBI, for instance, has an exposure of Rs 11,000 crore.

Last week, SBI chairman Dinesh Khara said the bank will take all necessary measures to insulate its balance sheet from stress in telecom companies.