COAI seeks an additional two-year moratorium on payment of installments of spectrum by CSPs

Cellular Operators Association of India (COAI), for the fourth time since November 2018, has approached the telecom department secretary to seek an additional two-year moratorium on payment of instalments of spectrum won in auction and interest charges imposed on instalments. A similar request had been submitted by Assocham in December 2018. COAI had also asked for a reduction of the interest rate, currently 9 percent. It also wants it to be linked to the prime rate, which will be lower.

Telecom companies will have to pay the government Rs 24,500 crore in 2019, as deferred payment for spectrum won earlier, as against Rs 19,600 crore in 2018. This is equivalent to almost the entire estimated earnings before interest, taxes, depreciation, and amortization (Ebidta) of these companies this financial year (2018-19).

In 2019, while Bharti Airtel has to pay Rs 5751 crore of deferred payments, Vodafone Idea has to pay Rs 12,273 crore, RJio Rs 3421 crore, TTSL Rs 1241 crore, MTNL/BSNL Rs 642 crore, RCom Rs 515 crore, MTS Rs 414 crore, and Aircel Rs 263 crore.  Some of these payments are under dispute, as a few companies have folded up and the new owners have not cleared the older dues.

This was prompted by Vodafone Idea, who if does not get a moratorium on the deferred payments, may have to revisit the capital of Rs 25,000 crore it plans to raise by March 2019, since around 40 percent of it will be used up for just this in 2019. Apart from the fact that there is no industry consensus on the moratorium, RJio does not support the proposal though it is a COAI member, the government had already given the industry, concessions by raising the repayment period to16 years from the earlier 10.