Struggling Vodafone Gets Respite With Today’s Big Telecom Reforms

Shares in Vodafone Idea rose 2.9 per cent after the federal government introduced telecom reforms.

New Delhi:

The Union Cabinet right now accredited a aid bundle for cash-strapped telecoms sector together with a four-year moratorium on airwaves funds as a result of authorities, the telecom minister stated.

The deferred funds cycle will start from October 1, Telecom Minister Ashwini Vaishnaw stated, giving debt-ridden Vodafone Idea – which beforehand stated it runs the danger of a shutdown with out authorities assist – extra time to pay dues.

Shares in Vodafone Idea rose 2.9 per cent on the information, whereas Bharti Airtel closed 4.5 per cent up in a broader Mumbai market that closed 0.8 per cent increased.

Some of the opposite measures introduced within the telecoms bundle embody elevating the tenure of airwaves held by corporations to 30 years from the present 20 years, waiving the utilization cost for airwaves acquired through future auctions, and utterly free sharing of spectrum between carriers, Mr Vaishnaw stated.

Bharti Airtel and Reliance Jio stated the measures will enhance development within the telecoms trade. Vodafone Idea’s house owners, Britain’s Vodafone Group and India’s Aditya Birla Group, stated the reforms will assist unshackle the telecom sector.

The telecom sector bumped into bother in late 2016 with the entry of billionaire Mukesh Ambani’s Reliance Jio, sparking a value battle that has compelled some rivals out of the market and turned income into losses.

Mr Vaishnaw stated the federal government was altering the contentious definition of adjusted gross income (AGR) to depend solely telecoms income.

India had lengthy held that even firms’ non-telecoms income was a part of AGR, resulting in a prolonged authorized battle which culminated in 2019 with the Supreme Court siding with the federal government’s view and resulting in a invoice of roughly $13 billion for wi-fi carriers.

All telecom reforms shall be utilized going ahead and never retrospectively, Mr Vaishnaw stated, which suggests carriers nonetheless should settle billions of {dollars} in excellent AGR funds to the federal government.

Respite For Vodafone Idea

The measures, which additionally embody a four-year deferral in funds of AGR dues, will seemingly ease the money crunch at Vodafone Idea.

The Supreme Court had directed firms to clear AGR dues by 2031.

Vodafone Idea, a mixture of the India unit of Britain’s Vodafone Group and home telecom agency Idea Cellular, has paid the federal government Rs 78.54 billion ($1.07 billion) in AGR dues, however nonetheless owes roughly 500 billion.

It is saddled with internet debt of Rs 1.91 trillion and its billionaire chairman’s resignation final month sparked fears that the nation could be left with simply two main carriers.

Mr Vaishnaw right now stated the federal government didn’t desire a duopoly.

“We believe that there should be healthy competition in the sector. And for that there will be further reforms when the 5G spectrum is auctioned out … so that more and more players can get into this sector,” he stated.

Bharti Airtel has stated it paid dues estimated at Rs 180 billion and authorities figures present it owes an extra 259.76 billion.

The latest service, Reliance Jio, has already paid its small share of AGR dues.

As a part of the measures, the cupboard additionally allowed 100 per cent overseas direct funding within the sector through the automated route, Mr Vaishnaw stated, a transfer that may permit straightforward funding within the sector with out separate authorities approvals.

“The relief comes just in time, and it will, at the very least, assist telecom companies in navigating the market,” stated Sonam Chandwani, Managing Partner at regulation agency KS Legal and Associates.

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