Interest pushes up telcos' auction payout to Rs 3 lakh cr in 10 yrs

Interest rate, at 10% in earlier auctions was decreased to 9.3% in last bidding process in 2016

The current stress in the telecom industry has prompted the government to work out the math on the spectrum money that operators will have to pay over the next 10 years, inclusive of interest. An internal estimate done by the Department of Telecommunications (DoT) suggests around Rs 3 lakh crore should come from telcos till 2028-29 as deferred payments for the spectrum they have acquired in the recent auctions, a source told Business Standard.

While Rs 9,486 crore is expected as spectrum payment along with interest during the current financial year, the amount will increase to Rs 24,619 crore in 2018-19 and to Rs 30,885 crore every year for the next six years. In 2025-26, the amount payable to the government will come down a bit to Rs 29,897 crore, and then decrease in the next two years to Rs 21,545 crore each and in 2028-29 to Rs 6,412 crore.

Telcos have to pay around Rs 3.26 lakh crore for airwaves acquired in auctions since 2010. Of this, they have paid about Rs 1.64 lakh crore and the remaining Rs 1.61 lakh crore is scheduled to come in the next 10 years. However, the interest will push up the outstanding amount to Rs 2.99 lakh crore, estimates show.

DoT officials are learnt to have recently apprised Telecom Minister Manoj Sinha about the deferred payments in the backdrop of the debt crisis in the industry.

Even as in the 2010 auction, the entire amount was paid upfront, subsequently, the upfront payment was reduced to 25 per cent and 33 per cent for different frequency bands. The remaining amount was to be paid in 10 installments after a two-year moratorium.

The interest rate, at 10 per cent in earlier auctions, was also decreased to 9.3 per cent in the last bidding process in 2016.

Latest entrant Reliance Jio, which is alleged to have disrupted the telecom space with its deep discounts and low tariffs, recently blamed the deferred payment option as the reason for sky-rocketing prices of spectrum.

Jio said telecom operators bid aggressively for airwaves because they didn’t have to pay the entire amount upfront. To fund their spectrum purchases, telcos took loans, thereby increasing their debt.

The telecom sector, in the midst of a financial stress, is holding meetings with the government to get a breather. Operators have demanded a wider payment duration for spectrum, preferably for the remaining period of validity of spectrum. They have also sought reduction in levies like licence fees and spectrum usage charges.