Panel Raises Relief Hopes For Vodafone Idea, Airtel, Likely To Seek Licence Fee Cut

In an attempt to alleviate financial stress in the telecom sector, the Committee of Secretaries (CoS) is expected to suggest a cut in the licence fee paid by telcos and allowing a two-year moratorium on spectrum payments.

To recap, the government last month constituted the panel under cabinet secretary Rajiv Gauba to consider the demands of service providers such as Bharti Airtel and Vodafone-Idea Ltd and suggest ways to mitigate their financial stress and create an environment conducive for investment.

The committee is poised to recommend slashing licence fee to 5 percent of adjusted gross revenue (AGR) from 8 percent. Furthermore, all GST-related matters, including a refund of input tax credit and cut in the tax rate, are expected to refer to the GST Council, three people familiar with the development told a leading business daily.

It is worth noting that the October 24 Supreme Court’s verdict had dealt a body blow to the old telcos such as Vodafone Idea and Bharti Airtel, allowing the government to recover AGR of about Rs 92,000 crore from these service providers.

The unanimous view among members of the committee as well as at the top levels of the government was that the telecom industry needed three private players, apart from state-controlled telecom companies, the daily quoted a person aware of the matter.

Many industry insiders believe that Vodafone, which owns 45 per cent of Vodafone Idea, is likely to shut down its India operations given its mounting losses, spawning a duopoly between Mukesh Ambani-led Reliance Jio and Sunil Mittal’s Bharti Airtel. More importantly, the Centre approved a Rs 69,000-crore bailout package for MTNL and BSNL, which will now merge, makes the going even tough for the old telecom players.

The incumbent telecom players like Airtel and Vodafone Idea want the panel to take a quick decision on giving the much-needed respite on the AGR-related dues.

The publication quoted an unnamed senior telecom executive as saying that the Centre should devise a way to increase tariffs which, combined with any aid on AGR-related dues, will be the much-needed booster shot for the industry saddled with over Rs 7 lakh crore of debt.―Times Now