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  3. Govt clears relief package for financially-stressed telecom sector

Govt clears relief package for financially-stressed telecom sector

08 Mar 2018 Evaluate

Based on the recommendations of the Inter Ministerial Group (IMG), the Union Cabinet has given its nod to a relief package for the financially-stressed telecom sector. The government agreed to allow more time to the telecom operators to pay for the spectrum bought in auctions, under the new plan and also relaxed the spectrum holding limit for telecom companies to 35% from 25% at present. These measures are expected to increase the cash flow for telecom operators immediately, providing the operators some relief.  Besides, revising the limit for spectrum holding will facilitate consolidation of telecom players and may encourage their participation in future auctions.

Last year, the IMG was tasked to suggest policy reforms and strategic interventions for the troubled sector bruised by falling tariffs, eroding profitability and mounting debt in the face of stiff competition from new entrant Reliance Jio. The IMG, in its recommendations submitted last year, had mooted the extension of time period for the payment of spectrum bought in auctions by operators to 16 years from the current 10 years. At present, a portion of spectrum auction amount is taken as upfront payment by Department of Telecommunications (DoT), and the rest after a two-year moratorium is paid out every year in 10 installments.

The Telecom Commission, which is the highest decision making body at the Department of Telecom, had also approved sectoral regulator Trai's recommendation that the ceiling on spectrum held by mobile operators within a particular band be removed. It had suggested 50 percent cap on combined radiowave holding in efficient bands. The IMG had held eight meetings over a period of several months but in its recommendations, had stayed away from suggesting big-bang reforms. Instead, its recommendations focused on easing the short-term pain points to give the sector time to rework its investments and business strategy.

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