Amid Coronavirus Outbreak, RBI Loan Breather For Telcos

The three-month moratorium on bank term loans and working capital finance offered by the Reserve Bank of India (RBI) in response to the raging pandemic is likely to offer some short-term cash-flow respite and improve the liquidity levels of already stressed telcos, especially cash-strapped Vodafone Idea, analysts and industry experts said.

Experts though have called on the government to consider a three-month moratorium on operators’ revenue-share commitments for the April-June quarter FY21, which would be more significant relief for the debt-laden telecom sector that is currently reeling under the impact of the adjusted gross revenue (AGR) payments crisis.

“It would partly alleviate immediate cash flow needs and generate some liquidity for the struggling telcos and help then pay staff salaries and meet working capital expenses such as payments to vendors, tower partners, diesel costs, amongst others,” Rajan Mathews, director general of the Cellular Operators Association of India (COAI). COAI represents Bharti Airtel, Vodafone Idea and Reliance Jio.

Industry estimates peg the combined cash flow relief for the Big 3 telcos following the 3-month moratorium at around Rs 4,000 crore in terms of servicing their debt, which will not enough for a sector saddled with a whopping Rs 7 lakh-crore debt burden and struggling to pay off its AGR dues.

Prashant Singhal, Global Telecommunication Leader, EY, told ET added the actual quantum of cash flow relief depends on the term loan repayment structures that would vary for each telco.

He though said the government “could provide significant relief by considering a three-month moratorium on the revenue share payouts for the upcoming April-June quarter that could collectively provide a combined relief of roughly Rs 4,000-4,500 crore to the Big 3 operators”.

Telcos meet their revenue share obligations by paying a percentage of their AGR as licence fees and spectrum usage charges (SUC) to the telecom department. They pay 8% of their AGR as licence fees and around 4% as SUC.

Ex-Bharti Airtel CEO Sanjay Kapoor though wants the moratorium to be extended to six months, given the financial stress and challenges the sector faces, especially at time when it’s playing a crucial role in managing the increase in home internet consumption and keeping India Inc operational amid countrywide lockdowns caused by the pandemic.

At press time, Airtel, Vodafone Idea and Jio did not respond to ET’s queries.

The government has estimated VIL’s dues at Rs 58,254 crore, Bharti Airtel’s at Rs 43,980 crore and Tata Teleservices’ at Rs 16,798 crore. So far, Vodafone Idea has paid Rs 6,854 crore, Airtel Rs 18,004 crore and Tata Tele Rs 4,197 crore. The Supreme Court has agreed to consider the government’s plea on allowing the telcos to stagger their payments over 20 years or less. The matter will be taken up at the next hearing.

―Business Journal