Indian operators will be able to defer payment of all spectrum-related fees for two years following a government decision aimed at offering financial relief in an overly competitive market.
The relief was approved by the Indian cabinet yesterday (20th November) and was likely influenced by the Supreme Court’s decision last month to extend the definition of adjusted gross revenue (AGR). The ruling saddles India’s operators with a further INR933 billion ($13 billion) in licensing and usage fees.
India’s second and third largest operators by subscribers – Vodafone Idea and Bharti Airtel, respectively – are in talks with the government in an attempt to overturn the court ruling. Both operators have substantial levels of debt, and the ruling would oblige each of them to hand over colossal fees - Vodafone Idea’s alone would total over INR400 billion.
The ruling has come at a time when debt levels among operators are soaring following a three-year ‘race to the bottom’ price war instigated by the market entry of Reliance Jio, which now leads the market by subscriber numbers.
The deferral period begins in April 2020. A bank guarantee is required by operators that wish to postpone their payments.
Speaking to The Economic Times, the COAI (Cellular Operators Association of India) said that the deferral would “certainly provide some immediate cash flow relief. However, the high level of levies and taxes continues to be a challenge for the sector.”
