Telecom stocks rise as spectrum payment timeline extended

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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 on Wednesday approved a relief package for the stressed telecom sector, easing spectrum-holding caps and extending the payment period for spectrum acquired in auctions to 16 years from 10 years.

"Revising the limit for the spectrum cap holding will facilitate consolidation of telecom licenses and may encourage the participation in future auctions", the release noted. The government has considered the importance of telecom and the sustainability of the Industry.

"The telecom operators will now be able to trade in excess (subject to the prescribed time limit) as well as the current spectrum held by them with other telecom operators depending upon their current spectrum holdings".

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With this change, Vodafone India Ltd and Idea Cellular Ltd, which are set to merge their operations, will not have to surrender spectrum in seven circles where they would have otherwise breached the caps as a combined entity.

The increased caps will also open the doors for the newest entrant Reliance Jio to acquire more spectrum.

The Telecom Commission, the apex decision-making body at the Department of Telecom (DoT), is scheduled to meet on Tuesday to discuss IMG recommendations over spectrum payments.

The Indian telecom industry, which is locked in an intense tariff war, owes a staggering Rs 4.6 lakh crore to various financial institutions and banks. With the increase in caps, such spectrum could be retained by Idea, Goldman added. "Extending the time period for spectrum payments is good from cash flow perspective but it does not fix the real issues of the industry which has to pay nearly 30% of its revenues as levies to the government", said Rajan Mathews, director general of Cellular Operators Association of India (COAI), an industry body.

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However, more comprehensive steps are needed, say experts.

"With the restructuring of the deferred payment liability, the cash flow for the telecom service providers will increase in the immediate time-frame, providing them some relief". "We are grateful to the government for the benefits extended by way of extended payments and enhanced spectrum caps".

Telecom stocks saw some buying activity on Thursday following the cabinet relief.

India sold the largest amount of spectrum last November, raising Rs 65,789.12 crore with Vodafone India and Bharti Airtel emerging as the biggest buyers of 4G airwaves, followed by newcomer Reliance Jio Infocomm and Idea Cellular.

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