Help to telecom sector might be on Union Cabinet agenda today

The Union Cabinet is likely on Wednesday to consider the recommendations of an inter-ministerial group (IMG) on how to ease financial stress in the telecom sector.

The proposals include easing of spectrum holding limits for telecom companies, raising the tenure of spectrum payment to 16 years and changes in interest rates. If approved, these should ease the financial pressure on operators in the short term. Also, to help entities under stress to exit the sector, while providing an opportunity for larger ones to consolidate.

Telecom Regulatory Authority of India (Trai) had recommended raising the 25 per cent overall spectrum holding limit to 35 per cent. And, removing the cap of 50 per cent holding in the same band. Instead, it recommends a cap of 50 per cent on combined spectrum holding in the sub-1 GHz bands (700, 800 and 900 MHz. This has been cleared by the Telecom Commission, highest decision making body at the department of telecommunications (DoT).

Relaxation of spectrum caps was part of the proposals from the IMG, formed in June last year to address stress in the sector. It had recommended raising the tenure of paying for spectrum to 16 years and a shift from prime lending rate to a marginal cost of funds-based one. On spectrum caps, the IMG had asked DoT to take the opinion of Trai.

Relaxation in the 50 per cent cap will allow Reliance Jio retain most of the airwaves in the 800 MHz band, after the acquisition of Reliance Communications' (RCom's) assets. Vodafone and Idea Cellular will also be able to retain most of their airwaves after their proposed merger.

The telecom industry' combined debt is Rs 4.5 lakh crore, incurred mainly on account of payment for spectrum, spectrum usage charge and other levies. The industry has written to the DoT for help. Since Reliance Jio entered the telecom fray, the older operators -- Bharti Airtel, Vodafone, Idea Cellular and RCom -- have all seen their profit slide.