The relief on fees comes after Vodafone Idea Ltd. posted the worst quarterly loss in India’s corporate history earlier this month.
- Moratorium to be for 2 years beginning April 2020, says Finance Minister
- Interest as stipulated in airwave auctions will continue to be paid
- Vodafone Idea posted worst quarterly loss in India’s corporate history
The government will defer spectrum payments due from telecommunications companies for two years to help an industry ravaged by a years-long price war, mounting debt and a court decision last month demanding $13 billion in overdue fees.
The moratorium will be for two years beginning April 2020, Finance Minister Nirmala Sitharaman told reporters after a cabinet meeting in New Delhi on Wednesday. Interest as stipulated in airwave auctions will continue to be paid, she said.
The proposal was recommended by a panel of senior bureaucrats under Prime Minister Narendra Modi to help wireless carriers the government estimates owe more than $20 billion in license fees and spectrum charges. The relief will be worth as much as Rs. 45,000 crore ($6.3 billion) and the panel will continue to discuss other measures to help the industry, an official told reporters.
PM Modi intends to help preserve the survivors in a telecommunications industry that has shrunk from a dozen wireless operators a couple of years back to just three private-sector firms. Carriers that had flocked to the country’s fast-growing market were led to merge or quit the business after Reliance Jio Infocomm Ltd., led by billionaire Mukesh Ambani, spurred an intense price war at its launch in 2016.
The relief on fees comes after Vodafone Idea Ltd. posted the worst quarterly loss in India’s corporate history earlier this month and Bharti Airtel Ltd. logged a record deficit for the September quarter. Jio, which overtook both companies and became the top carrier by subscribers this year, had argued against government action to help Vodafone Group Plc’s Indian venture and Bharti, which is backed by billionaire Sunil Mittal and Singapore Telecommunications Ltd.
Expectations for government help and plans by carriers to raise prices sparked a rally in shares of Vodafone Idea, which more than doubled in price over the past four trading days in Mumbai. Bharti also climbed, while Jio parent Reliance Industries Ltd. jumped to a record.