No tangible benefit from extension of spectrum payment period: COAI

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SME Times News Bureau | 12 Jan, 2018
Industry body Cellular Operators Association of India (COAI) on Thursday said the decision taken by the Telecom Commission to extend payment period for spectrum to 16 years will ease cash flows initially, but will not yield any tangible financial benefits for the telecom industry.

The COAI said the proposal to extend the deferred payment of spectrum from the current 10 equal annual instalments to 16 will give initial cash flow relief. However, the industry will end up paying around Rs 80,000 more over the life of the debt arising from the lengthened time period of the payments.

"While this does give initial cash flow relief, the industry will end up paying more over the life of the debt arising from the lengthened time period of the payments. The additional payment on account of this is expected to be around Rs 80,000 crore," Director General COAI Rajan S. Mathews said in a statement.

"Along with extending the deferred payment schedule, a nominal interest rate should have also been prescribed instead of the existing rates," he added.

The COAI welcomed the Telecom Commission's decision (taken on Tuesday) to increase the overall spectrum cap -- which will facilitate mergers and acquisitions in the sector -- bringing in significant costs saving and reduction in hyper-competition, stabilising the sector in the long run.

However, the industry body expressed disappointment that the government had not done much to address the "systemic issues" of the industry like license fees and spectrum usage charges (SUC) as already recommended by the TRAI.

Stating the telecom industry's current financial health, the COAI said the sector was struggling to manage a cumulative debt estimated at Rs 4.6 lakh crore against revenues that have fallen to less than Rs two lakh crore.

The industry body added that the decision to reduce the interest rate charged as penalty for the overdue payments by about two per cent is also an extremely well meaning and conducive step.

"However, not all the decisions taken, will have a significant impact on the industry. The decision to extend the deferred payment of spectrum ... will ease the cash flows in the initial years. However, since only the spectrum payment tenure is being extended, no real tangible financial benefit will accrue to the industry," Mathews added.

"Only in a conducive and mutually supportive environment can the industry continue to provide value and new technology to customers, as well as enhanced revenue to the Government," Mathews said.