COAI sees no tangible benefit from spectrum payment leeway

Industry body COAI today said the proposal to extend payment period for spectrum to 16 years from the current 10 years will ease cash flows initially, but will not yield any tangible financial benefits for telecom companies.
This is because the industry will end up shelling out Rs 80,000 crore more over the life of the debt on account of the extended timelines for spectrum payment, the Cellular Operators' Association of India (COAI) argued.
"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, Rajan Mathews, Director General, the COAI said in a statement.

The COAI gave a thumbs up to Telecom Commission's recent nod to raise spectrum caps (a proposal that is now headed for Cabinet) saying it will facilitate Mergers & Acquisitions, bring significant cost savings, reduce hyper-competition and stabilise the sector in the long run.
Telecom Commission recently cleared the raising of spectrum holding limit for mobile operators and DoT is likely to send it this week for Cabinet approval as part of relief measures that have been suggested for the sector by an inter-ministerial group (IMG). Amongst various measures, the proposed relief package includes giving more time to telcos to pay for spectrum they bought and easing interest rates on certain penalties.

In a statement today, the COAI, which represents leading operators like Bharti Airtel, Vodafone and Idea Cellular, also expressed disappointment that "systemic issues" including reduction in license fee and spectrum usage charges remained unaddressed.

The Indian telecom sector is struggling to manage a cumulative debt of about Rs 4.6 lakh crore against revenues that have shrunk to less than Rs 2 lakh crore, the association said underlining the industry's financial woes.
The COAI said that the Telecom Commission's decision to reduce by about two per cent, the interest rate charged with regard to penalty for the overdue payments "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...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," Mathews added.
He also expressed dismay that "government had not done much" to address the systemic issues of the industry, such as reduction in license fees and spectrum usage charges etc. as already recommended by the TRAI.