Government Grants Telcos Relief by Deferring Spectrum Payments

India on Wednesday allowed telecom operators to defer payments due for airwaves bought via auction until the end of March 2022, giving some respite to firms after a court ruled they must pay overdue levies and interest of nearly $13 billion (roughly Rs. 93,000 crores).

The Indian Supreme Court last month said telecom operators must pay the pending amount to the government within three months, putting at risk the operations of leading operators such as Vodafone Idea and Bharti Airtel.

The lobby group Cellular Operators Association of India (COAI) had pushed the government to halt the spectrum payments.

On Wednesday, India's cabinet said it would defer the payments for the next two financial years, giving firms until April 2022 to commence payment.

"Deferment of spectrum auction instalments will ease the cash outflow of the stressed telecom service providers (TSP) and facilitate payment of statutory liabilities and interest on bank loans," the Indian cabinet said in a statement late on Wednesday.

Any deferred amounts will be spread equally over the remaining instalments to be paid by the TSPs, the government added.

The payment dispute centres around the definition of adjusted gross revenue, or AGR.

Telecom providers in India pay the Department of Telecommunications (DoT) 3-5 percent of their AGR in spectrum usage charges and 8 percent as licence fees.

Companies have long argued that AGR should comprise just revenue accrued from core services, while the government says it should include all revenue. The Supreme Court last month upheld the DoT's definition.

COAI director general Rajan Mathews welcomed the government's decision, saying it would provide some immediate cash flow relief to the industry, but added that New Delhi must consider relaxing its outright demands of AGR.

Both Bharti and Vodafone Idea have warned that their operations may be under threat unless the government stops hitting operators with higher taxes and charges.

It was not immediately clear how much the two companies would benefit from the deferred spectrum payments.Jio, the newest Indian carrier backed by Asia's richest man Mukesh Ambani, is least burdened by the AGR issue, which dates back more than a decade, as it only started operations in late 2016.

© Thomson Reuters 2019