Government gives Relief to Telecom Companies, yet Investors are Disappointed

For the last 4 business days, the shares of two telecom companies Vodafone-Idea and Airtel were seen increasing rapidly. On this rise, there was a sudden break on Thursday.
Government gives Relief to Telecom Companies, yet Investors are Disappointed

By the way, while giving relief to the telecom companies, the Central Government has approved the proposal to postpone the payment of spectrum installment for them for 2 years. But despite this decision of the government, there is disappointment among investors of telecom companies.

What is the reason for disappointment?

In fact, Union Minister Ravi Shankar Prasad has told the House that the government is not currently considering the proposal to give exemption in penalty and interest to the telecom companies in the Adjusted Gross Revenue (AGR) case. Please tell here that Vodafone-Idea and Airtel had appealed to the government to waive penalty and interest. This means that the main demand of telecom companies has not been accepted at the moment. This is the reason that Airtel shares fell by close to 3 percent during initial trading on Thursday, while Vodafone-Idea shares fell by 4 percent.

After all, what do telecom companies want?

Actually, the government owes more than Rs 1 lakh crore to the telecom companies. This is due to the adjusted gross revenue (AGR). AGR is the usage charge and licensing fee charged by the telecom companies by the Department of Telecommunications (DoT) of the Ministry of Communications. Against this amount of money, the telecom companies approached the Supreme Court. But the Supreme Court had also accepted the government's demand.

After this, the telecom companies have requested the government for relief in this outstanding amount. Explain that Airtel and Vodafone-Idea have suffered the biggest losses so far in the second quarter due to AGR. Vodafone-Idea alone incurred a loss of Rs 50,921 crore in this quarter. At the same time, Airtel is in a loss of 23 thousand crores.

The government has approved the proposal to postpone payment of spectrum installment only for 2 years to telecom companies struggling with financial crisis. Under this, companies have been given exemption from spectrum installment payments for two years 2020-21 and 2021-22. However, companies will have to pay the interest applicable on the delayed payment of spectrum.

However, with this decision of the government, Airtel, Vodafone Idea and Reliance Jio are expected to get relief of about 42,000 crores. Explain that according to the data of 31 August 2017, there is a huge debt of Rs 7.88 lakh crore on the telecom sector. Out of this, Indian debt includes a total of Rs 1.77 lakh crore and foreign debt is Rs 83,918 crore.

COAI, an organization related to the telecom industry, has said that various measures, including grant of two years' deferment of spectrum arrears by the government, will provide relief to the debt-ridden sector. Cellular Operators Association of India (COAI) Director General Rajan Mathew said that the proposed increase in mobile calls and data rates will help to reduce stress to some extent. Mathew said, "The two-year deferment in spectrum payments and the proposed increase in the tariff rates will help restore the telecom sector. "

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