The Union Cabinet approved two key measures in telecom to facilitate investments and enhancing ease of doing business.
These include restructuring: Deferred payment liabilities of spectrum auction of telecom service providers (TSPs), Revising the Spectrum Cap Relaxation holding.
Within a bid to provide relief to financially stressed telecom sector, the Cabinet has allowed telcos to pay for spectrum over 16 years instead of 10 years and permitted them to hold more airwaves. It also relaxed caps on keeping spectrum, helping ongoing mergers like that between Vodafone and Idea as the combined entity would have breached the current limits in certain circles or telecom zones.
The Cabinet allowed companies to carry up to 35 per cent of all the available spectrum or airwave in a circle or telecom zone. The present limit for such holding is 25 %. In addition, it removed the existing intra-band cap. No more than 50 per cent of the total available spectrum will be provided to telecoms in sub-1 gigaHertz bands of 700 MegaHertz, 800 MHz and 900 MHz .
Spectrum Cap Relaxation
The spectrum cap relaxation would also help billionaire Mukesh Ambani’s Reliance Jio to acquire spectrum of Reliance Communications using bands.
The decision emerged after telecom companies flagged their concerns over financial stress due to intense competition unleashed by Reliance Jio.
An official statement stated that the government will receive Rs 74,446.01 crore more consequently of deferring spectrum payments till 2034-35.
To tackle ,An Option to raise the installments to 16 for spectrum will be given to the operators.
Great Move of Relief for Telecom sectors
The move will facilitate consolidations as well as mergers and acquisitions in the sector. “TRAI had recommended revision in the existing limits of cover for spectrum holding taking into consideration the technological advancement, efficient use of spectrum, actions to facilitate consolidation etc.
Long-term systematic issues have not been addressed and they need to be resolved quickly before more companies get into financial problems.The financial stress in the sector has seen Reliance Communication sell assets to Reliance Jio while Vodafone and Idea have decided to merge to create a stronger balance sheet.
- With these decisions, gov. hopes the cash flow for the telecom providers will increase in the time providing some relief.
- Revising the limit for the spectrum cover will facilitate consolidation of telecomlicensees and encourage the participation in the future auctions.
- The next changes that the government should consider to boost the telecom sector are easing obtaining approval from the DoT.
- Better functioning of WPC and SACFA and providing flexibility in complying with MRO and EMF obligations .
- And Amending the Telecom Merger and Acquisition Suggestions.
Role of Telecommunications Service Providers (TSP)
Telecommunications Service Providers (TSP) is a type of communications provider that has traditionally provided telephone and similar services.
This category is going to include local exchange carriers, competitive local exchange carriers, and mobile wireless communication companies.
But, today there are extensive private players generally in most regions of the world, and even most of the government owned companies are being privatized.