New telecom bill may clarify on insolvency norms for stressed firms: Report

With Indian Telecommunication Bill, 2022, a spectrum will be held by a telco till it continues to pay the dues and provide the services. Once the service stops, the spectrum will go to the government

The proposed Indian Telecommunication Bill, 2022, is expected to introduce reforms that will make it easier to deal with insolvency of stressed assets, and mergers and acquisitions (M&A). According to a report by BusinessLine (BL), it will also enable the centre to waive off dues of stressed telcos. 

Under the current Insolvency and Bankruptcy Code (IBC) rules, it is unclear whether the spectrum owned by defaulting telecom operators belongs to the government or banks. 

With the new bill, according to BL, the ownership of such spectrum will go to the government. The Department of Telecommunications (DoT) had earlier stated that the spectrum is a public resource and must go to the centre. 

Under the new rules, the spectrum will be held by the telecom operator till it continues to pay the dues and provide the services. Once the service stops, the ownership of the spectrum will go to the government. 

Additionally, the bill is also expected to introduce a framework to deal with financially stresses telcos. It will give the centre the power to convert the dues to equity, defer or even write off the dues in order to maintain competition. 

Also, the bill will also make changes to the M&A rules of the telcos. According to the Business Line report, after the bill is passed, the telcos will not be required to get prior permission for such deals, only a notice period will be required.

The Telecom Regulatory Authority of India (TRai) will also be structured to work independently and will be responsible only to the Parliament. Currently, it has to report to the DoT also.