In a big relief to the Indian Telecom sector, government approves major reforms

hope for revival for telecom sector government approves major reforms

In a welcome move, the government announced that non-telecom revenue will be excluded from the definition of AGR “on a prospective basis.”

Union Cabinet has announced a moratorium of four years for the payment of the Adjusted Gross Revenue (AGR) dues, providing relief to the debt-strapped telcos - Vodafone Idea and BhartiAirtel. The cabinet also approved a 100 percent FDI (Foreign Direct Investment) in telecom via the automatic route. The government wishes toincrease the penetration of broadband and telecom connectivity in the country with reform measures. The government is also looking to increase liquidity and create a healthy environment for future 5G investments.

The share price of Vodafone Idea gained the most. It went fromRs 9.82 up to Rs.11.50,gaining more than 27 percent. Other telecom companiesalso gained significantly, which include Indus Towers, Reliance Communications, Vindhya Telelink, Sterlite Tech, and Bharti Airtel. The four-year moratorium also extends to other telecom dues, such as the spectrum due repayment purchased in the past auctions.

Both Vodafone Idea and BhartiAirtel have been struggling to make profits due to high debts and cut-throat competition in the Indian telecom sector. Both the telecom companies have already filed a review petition for a Supreme Court order, which quashed their plea for recalculation of their AGR liabilities.In a welcome move, the government announced that non-telecom revenue would be excluded from the definition of AGR “on a prospective basis,” which will undoubtedly provide some relief to the telcos.