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Relief call for telecom

New Delhi: The Union cabinet on Wednesday cleared a relief package for the debt-ridden telecom sector, giving operators more time to pay for the spectrum bought in auctions. It has also raised the cap on the spectrum that can be held by an operator to 35 per cent from 25 per cent of the radiowaves available in a circle.

The government will now allow an extended period of 16 years, including four years of moratorium, to make the payments for the spectrum bids. Earlier, the payment had to be made within 10 years, including a two-year moratorium.

The package was cleared by the cabinet based on the recommendations of the inter-ministerial group on the telecom sector.

Reliance Jio, Anil Ambani's struggling Reliance Communications (R-Com), Vodafone and Idea will benefit from the move.

Analysts believe the move will let Jio buy R-Com's remaining spectrum in the 850MHz band. R-Com has already sold a significant part of its airwaves to Jio but needs to sell more to clear its Rs 45,000-crore dues.

"We welcome the cabinet's decision to increase the overall spectrum cap as it will facilitate mergers and acquisitions. However, more steps are needed," said Rajan S. Mathews, director general of the Cellular Operators Association of India, an industry body representing major telecom companies.

High debt levels and stretched cash flows have seen operators pleading for various benefits, including interest rate cuts and treatment of all government levies as input tax which could be set off. Telecom players had also sought deferment of auctions for 5G network.

The cabinet also agreed to the telecom regulator's suggestion of doing away with the individual band limit of 50 per cent. Instead, it suggested that there should be a cap of 50 per cent on the combined spectrum holding by a telecom operator in the sub-1GHz bands of 700MHz, 800MHz and 900MHz.

This move will benefit the Vodafone-Idea Cellular merger as the combined entity would breach the 50-per-cent cap in five circles.

The cabinet also decided to do away with the cap for individual or combined spectrum holding in bands above 1GHz.

Officials said Trai had recommended revision in the existing limits on spectrum holding, taking into consideration factors such as technological advancement, efficient use of spectrum and measures to facilitate consolidation.

"With the restructuring of deferred payment liability, the cash flow for telecom service providers will increase in the immediate timeframe, providing them some relief. Revising the limit for the spectrum cap holding will facilitate consolidation of telecom licensees and may encourage their participation in the future auction," an official statement said.

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