COAI welcomes relief provided by Telecom Commission

Cellular Operators Association of India (COAI), the apex industry association representing the country's major telecom, internet, technology and digital services companies on Thursday welcomed the decision by the Telecom Commission to approve the Inter-Ministerial Committee's recommendations regarding the financial health of the telecom sector.

The Telecom Commission met on January 9 to deliberate over the recommendations of the inter-ministerial group (IMG) submitted in August last year.

The IMG was formed to look into various measures to be taken to improve the deteriorating financial health of the Indian telecom sector, that is currently struggling to manage a cumulative debt estimated, at Rs. 4.6 lakh crores, against revenues that have fallen to less than Rs. two lakh crores.

Amongst the decisions taken by the Telecom Commission in the meeting, several decisions encouraging investments and mergers were taken and they have been welcomed by the industry.

The decisions to increase the overall spectrum cap will facilitate mergers and acquisitions in the sector, bringing in significant costs saving and reduction in hyper-competition, stabilising the sector in the long run.

Additionally, the decision to allow 100 percent Foreign Direct Investment (FDI) through the automatic route is a welcome step, considering the fact that the industry needs substantial investment in the coming years.

The decision to reduce the interest rate charged, as penalty for the overdue payments by about two percent is also an extremely well meaning and conducive step.

However, not all the decisions taken, will have a significant impact on the industry.

"The decision to extend the deferred payment of spectrum from the current 10 equal annual instalments to 16 equal annual instalments will ease the cash flows in the initial years. However, since only the spectrum payment tenure is being extended, no real tangible financial benefit will accrue to the industry," said Director General, COAI, Rajan S. Mathews.

"While this does give initial cash flow relief, the industry will end up paying more over the life of the debt arising from the lengthened time period of the payments. The additional payment on account of this is expected to be around Rs. 80,000 crores. Along with extending the deferred payment schedule, a nominal interest rate should have also been prescribed instead of the existing rates," he added.

Mathews, further expressed disappointment that the government had not done much to address the systemic issues of the industry, such as reduction in USOF, License Fees (L.F) and Spectrum Usage Charges (SUC), as already recommended by the TRAI.

However, he remained optimistic that the government will continue to look into the matter.

"Only in a conducive and mutually supportive environment can the industry continue to provide value and new technology to customers, as well as enhanced revenue to the government," he concluded.