This comes at a time when Vodafone Idea, which is facing acute financial stress, has sent an SoS to the government, citing possible impact on its 27 crore subscribers.
The telecom department’s move, if it goes through, will be an extension to the already-running moratorium that was originally extended in November 2019 for fiscal years 2020-21 and 2021-22.
The bailout, if approved, will be for all telecom players and not just restricted to the ailing Vodafone Idea, where key shareholder Kumar Mangalam Birla has appealed for government intervention to ensure that the company remains a going concern. This would mean that any support will also be extended to other players such as Bharti Airtel and market leader Reliance Jio, and would be worth thousands of crores.
“The government is concerned about the health of Vodafone Idea and especially the fact that its further deterioration, or even collapse, may have a debilitating impact on their nearly 27 crore mobile customers and the financial system. A moratorium on spectrum payments is one of the options being considered. However, nothing has been finalised as of now,” sources told TOI.
The proposal is being discussed “at the highest levels” in the government, “both within and beyond the telecom department”, sources added, pointing out that the finance ministry and even the Prime Minister’s Office have been sounded out on the matter.
Vodafone Idea currently has loans worth Rs 1.8 lakh crore (at the end of the fourth quarter of 2020-21), and its last recorded losses stood at Rs 7,022 crore. The company has exposure worth thousands of crores with banks, while it has to pay even more to the government for spectrum and other dues. Apart from this, Vodafone Idea also has to pay a little over Rs 50,000 crore to the government as part of AGR dues following the Supreme Court verdict, though companies had been given a ten-year schedule to make the payout.
The telecom ministry, led by secretary Anshu Prakash, also took stock of the situation to work out ways to ensure minimal disruption. Prakash also heads the Digital Communications Commission, the top inter-ministerial body empowered to take decisions on the telecom sector.
The challenge for the government, however, is to assess whether a moratorium will be effective save Vodafone Idea from an impending bankruptcy. “It will be just a temporary relief in case their own business fundamentals doesn’t improve,” another source said.
In the previous spectrum payment deferment decision taken in November 2019, finance minister Nirmala Sitharaman had said that the industry was being handed out a Rs 42,000 crore lifeline by delaying immediate payments. It was also extended in view of the poor financial health of the telecom sector then, and as per estimates, the immediate spectrum payment relief for Airtel at that time was Rs 11,746 crore, for Vodafone Idea Rs 23,920 crore, and for Reliance Jio Rs 6,670 crore.
However, companies had been mandated to pay interest on the delayed payments so that the NPV (net present value) of the payable amount was protected. Also, they had to provide the government a financial bank guarantee of the revised annual instalment amounts payable subsequently. If another moratorium is extended now, the same terms would be applicable, sources said.
Another relief was handed to the companies in 2017 when the DCC (then called the Telecom Commission) had increased the payment tenure for auctioned spectrum to 16 years against the previously-mandated 10 years. This had also been done to increase the cash in hand for companies and help them tide over financial difficulties.