Telecom companies may seek fiscal relief to boost cash flow

   

KOLKATA: Mobile phone operators in the debt-laden telecom sector are likely to push for fiscal relief measures to boost cash flows, three people aware of the matter told ET. Among their key demands, telecom operators cutting across GSM and CDMA technology platforms are likely to seek an easing in spectrum payment norms coupled with 90-day deadline extension for licence fee and spectrum usage charge payouts to reduce financial stress, they said. The telecom sector has over Rs 4.74-lakh crore debt.

Mobile phone operators are also likely to seek an overall reduction in regulatory costs and a tweaking of SUC payout rules, by suggesting that such payments be allowed at the end of a quarter based on actual revenue instead of at the start of a period based on estimated revenues.  

Mobile operators are likely to urge the government to coax banks to extend longterm loans with 20-year tenures and explore ways to restructure the existing loans, the persons cited earlier said.

Telecom operators, it is learnt, are likely to write to the government seeking an extension in spectrum payment tenures from 10 to 18 years, which would enable a mobile carrier to spread out its airwavesrelated payments over the 20-year tenure of a licence, including the two-year moratorium.

"If approved, this would significantly reduce annual spectrum liabilities and bosost cash flows, which would enable a telco to invest more in data networks and customer experience, which it is unable to do now," a senior executive of a leading telecom company told ET.

Indications are that the Cellular Operators Association of India (COAI) and Association of Unified Telecom Service Providers of India (Auspi) are likely to write separate letters to the telecom department.

COAI's Director General Rajan Mathews and Auspi Secretary General Ashok Sud could not be reached for comments till the time of going to press.

The telecom industry's push for urgent fiscal relief comes at a time when net debt levels of top companies have skyrocketed in the aftermath of heavy data spectrum purchases over the last three years, and capex investments. 

Soon after FM Jaitley's budget presentation, COAI's Mathews said that mobile phone companies were disappointed that the financial health of the telecom industry was not addressed. 

Market leader Bharti Airtel's consolidated net debt in the December quarter was $14.34 billion, while Vodafone India's stood at Rs 35,400 crore, which would soar by another Rs 20,000 crore if deferred payment for its latest airwave purchases are accounted for.

Third-largest carrier, Idea Cellular, which is yet to report earnings for the third quarter, had reported a net debt ofRs 36,401crore in the quarter to September 2016. The continuing trend of high spectrum payments, resulting in higher amortisation costs, has also hit the return on capital employed (RoCE) for top telcos. For instance, Airtel's RoCE fell to 7.1% in the December quarter from 8.6% a year ago. Idea's RoCE has shrunk sequentially to 2.4% in the September quarter from 4.1% in the quarter to June 2016.

The chorus for fiscal relief has grown after Finance Minister Arun Jaitley largely ignored the sector's key demands in this year's budget, especially his not clearing the air on tax treatment of spectrum payments.