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The Indian Banks Association (IBA) has requested the Department of Telecommunications (DoT) to provide relief measures for telecom companies undergoing debt restructuring. This includes refunding payments related to airwaves surrendered by the telecom companies as well as cancellation of future deferred payments for this spectrum.
In the letter submitted to the DoT, IBA said “This money will be used for repaying the banks which in turn prevent loans from turning into NPA (non-performing asset)”. “We understand the government had allowed a similar facility to BSNL and MTNL in the past” it further added.
IBA has also requested speeding up of the process of providing relief along with return of bank guarantees provided by such companies since of theRs. 7.75 lakh crore telecom sector liabilities, Rs. 5.8 lakh crore was primarily towards banks and spectrum obligations. This would benefit the telecom operators by providing them with more working capital, since the troubled carriers, are currently selling assets including spectrum to reduce debt on their balance sheets.
It is becoming difficult for mobile operators to survive and service their debt without immediate support from the government, the IBA added.The revenue and operating profit has been declining in the telecom industry since 2016-17. The adjusted gross revenue of the industry declined to approximately Rs. 39,778 crore in the first quarter from approximately Rs. 53,384 crore in the same quarter of 2016-17. There has been a 25.5% drop in adjusted gross revenue of the industry in the April-June quarter on a y-o-y basis.
According to IBA, most of the operators undergoing restructuring had borrowed from public sector banks. Some of the mobile operators are undergoing financial restructuring under various RBI schemes.As part of debt restructuring, mobile operators have proposed optimising their assets and monetising non-core assets, including their existing portfolio of spectrum.
Banks are under stress as most of them have exposure to debt-ridden companies, like Reliance Communications and Aircel, who have already defaulted on their debt repayment obligations, and have been directed by the RBI to incorporate higher provisions for their exposure towards the sector.
An inter-ministerial group has recommended relief measures to address financial stress in the telecom industry which have been approved by the Telecom Commission, the highest decision-making body of the DoT. The proposals will go to the Cabinet for further approval.
Among the relief measures, the government will also increase the timeframe for deferred spectrum payments to 16 years as well as change the calculation of interest for delayed payments.
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