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Relief for telecom companies, as spectrum payment liability extended by government

With most telecom companies dealing with huge debts, it has come as a relief for them after the Telecom Commission has extended the spectrum payment liability. The spectrum payment now stands at 16 years, which is a huge relief for telecom companies. The decision to extend the spectrum payment was announced today by the Telecom Commission. Another benefit that the telecom companies will get is that the system of calculating interest on delayed payment of license fee and spectrum usage has been changed from pending lending rate (PLR) to marginal cost of funds based lending rate (MCLR) regime. In effect, this will reduce the interest burden to 12 percent. Currently, it is 14 percent, which was dragging down many telecom companies.

Most telecom companies have welcomed the government’s move. Rajan S. Mathews, Director General, Cellular Operators’ Association of India (COAI) said that they appreciate the efforts that the government is making to address their concerns. He said that the extension of spectrum payments will help increase the cash flow in the telecom sector. It will reduce their overall payment burden. However, he also mentioned that there are many more problems in the telecom sector. “It does not solve long-term systemic financial problems in the industry. The whole issue of adjusted gross revenue (AGR), license fee and spectrum usage charges need to be addressed quickly,” Mathews said.

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