Published: Fri, March 09, 2018
Hi-Tech | By Grace Becker

Cabinet approves easing spectrum cap

Cabinet approves easing spectrum cap

These are just some of the measures created to improve the health of an industry laden with debt amid intense competition. "These include restructuring the deferred payment liabilities of the spectrum auction of telecom service providers and revising the limit of the cap for spectrum holding for telecom service providers", an official statement said.

The IMG, in its recommendations submitted last year, had suggested the extension of time period for the payment of spectrum bought in auctions by operators to 16 years from the current 10 years.

An improved cash flow scenario for telecom players, though, would mean a fall in the government's budgeted revenue estimates from the sector.

"With the restructuring of the deferred payment liability, the cash flow for the telecom service providers will increase in the immediate timeframe providing them some relief", the government said.

"The increased installment is based upon the principle that the Net Present Value (NPV) of the payment due is protected as per respective notice inviting application for an auction of spectrum from 2012. The total amount received will be higher by Rs 74,446.01crore till 2034-35".

The Union Cabinet on Wednesday granted its approval for the relief package for the debt-laden telecom sector, as proposed by the Department of Telecommunications following clearance from the inter-ministerial Telecom Commission.

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Reacting to the development, shares of Bharti Airtel spurted 2.62 per cent to an intra-day high of Rs 414, while Idea Cellular jumped 4.39 per cent to an early high of Rs 83.10 on BSE. Predatory pricing from new entrant Reliance Jio had made matters worse for other players. With the cabinet easing cap on spectrum holdings, the two will no longer have to sell some of the spectrum in a few circles, where otherwise they would have breached the existing limits post the merger. It has also raised the cap on the spectrum that can be held by an operator to 35 per cent from 25 per cent of the radiowaves available in a circle. The revised spectrum cap limits may be revisited after Final Acts of World Radiocommunication Conference (WRC) 2019, said the statement.

The cabinet also chose to do away with the cap for individual or combined spectrum holding in bands above 1GHz.

"We believe this (proposal to combine all sub-GHz spectrum bands together for calculation of 50% spectrum cap in any service area) could help Idea the most", Adukia and Mubayi said in the note.

However, it's unclear if the Cabinet has accepted another TC recommendation - to lower the interest rate on penalties on outstanding dues of operators from 14% to 12%.

Rajan Mathews, director general, COAI said, "The new spectrum caps will facilitate consolidation in the industry - Reliance Jio-Reliance Communications and Idea-Vodafone".

He added that the systemic issues of the industry such as excessive taxes and levies of 30% or more remained unaddressed.

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