The government of India has come up with a great relief package of 4 Years of Moratorium for the Telecom Sector and has allowed 100% FDI via automatic route. What are the other details of the relief package and how Airtel is reacting to it, let’s discuss this in detail in this article.
Bharti Airtel Ltd is one of the world’s leading providers of telecommunication services with a presence in 18 countries representing India, Sri Lanka, 14 countries in Africa.
Relief Package Update:
- The government of India finally on Wednesday 16th September 2021 came up with a relief package to revive the telecom sector.
- The package consists of a 4-years moratorium on Spectrum and Average Gross Revenue (AGR) Dues.
- Also, 100% Foreign Direct Investments (FDI) is allowed through automatic route, which was 49% earlier, except China and bordering countries.
- Further, The government will have an option to convert any amount about the deferred payment due into equity at the end of the moratorium/deferment period.
- The government has also done away with the Spectrum Usage Charge (SUC), a substantial levy on telecom service providers (TSPs), from future auctions and increased the tenure of the spectrum of holdings from the existing 20 years to 30 years. This is valid only for future spectrum auctions.
- On Thursday 17th September 2021, a day after the announcement of the relief package by the government, Bharti Airtel declared that the company will opt for the 4-year moratorium on the spectrum and AGR dues, which will help the company to control cash outflow of around Rs. 35,000 Cr. to Rs. 40,000 Cr., which could be used for other purposes of the companies like network up-gradation, capital expansion program, etc.
- Bharti Airtel Chief Mittal also pitched greater collaboration between various telecom companies on the front of infrastructure — such as fiber, spectrum, and towers — so that a strong network can be built for consumers.
- Sunil Mittal also said that he will talk to rivals such as Reliance Jio, after having instant conservation with Vodafone Global CEO Nick Read and his Indian Partner and industrialist Kumar Mangalam Birla.
- He also talked about the need for an increase in tariffs which will enable the company to increase the Average Revenue Per User (ARPU) of Company. As per current times, the ARPU of the company should cross the level of Rs. 200 so that the company can cope up with the demand and needs of the Telecom Industry. Herein the Government of India and the regulator Telecom Regulatory Authority of India (TRAI) will check on whether the tariff hike is justifiable from consumers and the company’s point of view as well.
- Also, the Government of India and the Regulatory Authority understand the pain of the Telecom Industry where the total liability of the Industry is around Rs. 7 to Rs. 8 Lakh Cr. were hardly Rs. 1.5 Lakh Cr. of the loan amount is due towards Banks and Financial Institutions, but the rest payment is needed to be made to the Government itself.
- Currently, Bharti Airtel has set the target of achieving an ARPU of Rs. 200 in this fiscal year. Likely this could be the target of Vodafone Idea (Vi) also.
Through this relief package for Telecom Sector, the Government of India has shown the clear picture that it wants this sector to sustain in the long-term. Looking at the current situation, there is a rare possibility of a price war between the telecom companies instead all the companies might come together to stabilize the industry, keeping aside the fierce competition of gaining market share. This relief package is a strong relief for the Vodafone Idea and Bharti Airtel as well, hence both of the companies will be benefited. They discussed stocks are not direct investment advice and one should consult his/her financial advisor before making any investment decision.