What were the highlights of the telecom relief package announced by the government on 15th September?

The telecom package announced by the government on 15th September, had a number of relief measures for telecom companies. Here are some highlights. Firstly, the government announced a 4-year moratorium on repayment of telecom sector dues. This will include the AGR dues and the Spectrum usage charges or SUC payments. However, interest will be levied on such moratorium amounts at marginal cost of funds plus 2% premium.

This package is likely to come as a boon for Vodafone Idea, which is really struggling to stay afloat under a pile of debt and losses. Also, the government confirmed that non-telecom revenues will be excluded from the ambit of AGR levies in future. Also, telecom companies can surrender unused spectrum after 10 years by paying a small surrender fee. The spectrum period has also been hiked from 20 years to 30 years.

There will be 100% FDI through the automatic route in telecom. Also, the government has promised to rationalize the levy of SUC so as to reduce the capital cost of telcos and improve their IRR. The telecom sector overall will surely benefit from the package but it is not clear how much of benefit will accrue to Vodafone which continues to lose market share and the debt situation will only get worsened by its tepid cash flows.