Dues by way of fairness, defining non-telecom revenues: Guidelines probably in 2 weeks

The Department of Telecommunications (DoT) is predicted to come back out with tips over the subsequent 2 weeks for fee of statutory dues by telecom firms utilizing fairness, for which the division is predicted to have discussions with the Finance Ministry quickly, authorities officers stated. On Wednesday, the Union Cabinet authorized a collection of measures for the telecom sector, together with an possibility for firms to pay their statutory dues reminiscent of licence charge, spectrum utilization cost and the curiosity and penalties accrued on these with fairness of their corporations. This shall be relevant after the four-year moratorium interval given by the federal government to repay their dues concludes.
This was one of many measures unveiled on Wednesday the place the trade is awaiting for the fine-print. These tips will embrace the modalities and finer particulars of how the federal government plans to transform the due quantity of operators, arising as a result of four-year moratorium, to fairness. “The DoT will issue guidelines. In any case, these measures are applicable from October 1. Even if guidelines come later, it will not matter, since the applicability will be from October 1,” an official stated.
According to analyst estimates, the federal government may theoretically find yourself with a serious chunk of share in an organization like Vodafone Idea ought to it select to avail the moratorium and is unable to repay its dues within the four-year interval.
“While four-year moratorium would ease immediate cash flow constraints for Vodafone Idea (VIL), it will need to also raise around $1bn over next 6-9 months … Further, if VIL were to opt to convert Rs 67,000 crore of interest accrued during the moratorium period, it would entail a dilution of approximately 70 per cent for existing VIL shareholders with government owning around 70 per cent of VIL (on proforma basis assuming conversion at current market price of Rs 9 per share),” Credit Suisse famous in a analysis report.

The DoT can also be learnt to be engaged on tweaking the definition of non-telecom income for its exclusion from adjusted gross income (AGR). “Non-telecom revenue is defined in TRAI recommendations of January 2015. That will be our reference point. We will add more details later if required. But it will all be as simple as possible, so that there is no litigation in future,” a prime DoT official instructed The Indian Express. According to the official, this may primarily pertain to points reminiscent of curiosity earned by firms on their telecom revenues. The inclusion of non-telecom income for the aim of calculating AGR was a most important level of competition between the trade and the federal government for the final 20 years and the Supreme Court final 12 months dominated in favour of the Centre. The AGR is used to calculate levies reminiscent of spectrum utilization cost (SUC) and licence charge, that are paid yearly by telecom operators to the federal government. The Centre has introduced it can exclude non-telecom income from AGR however it’s nonetheless engaged on the precise modalities of the brand new definition.
The third main facet of Wednesday’s bulletins that has been flagged by firms is the elimination of SUC for spectrum auctioned hereon. Currently, SUC is calculated on the premise of a weighted common technique. Ahead of each spectrum public sale that has occurred, the federal government has notified a price of SUC relevant on airwaves picked by firms throughout that public sale. The quantum of the spectrum received by an organization decides the burden of the SUC price from that 12 months. It is then calculated because the sum of merchandise of the spectrum holding and their respective SUC charges divided by the full spectrum held by every firm. Theoretically, with future auctioned spectrum having 0 per cent price of SUC, the general price for every firm ought to come down, leading to profit accretion for cellular firms.

However, a senior telecom trade govt defined that for this measure to be efficient, firms should buy larger quantum of spectrum within the upcoming auctions. “Currently, operators are charged SUC at a rate between 3-5 per cent. It is between 4-5 per cent for Airtel in most circles, 3-4 per cent Jio and just above 5 per cent in most circles for Vi. For their SUC rates to come down, they will need to purchase a lot of spectrum,” the chief stated. Further, as per current coverage on SUC price calculation, there’s a flooring value of three per cent due to which advantages on lowered SUC for telecom corporations is not going to go under 3 per cent.
“If the government decides to keep the 3 per cent floor, then the impact will be marginal. If it does away with the floor, then SUC for companies like Airtel and Jio will fall to 2-2.5 per cent and this could result in significant revenue loss for the government,” they added.