Lok Sabha Question No. 123 (STARRED), answered on 2017-12-27
Subject: Debt of TSPs
Ministry: COMMUNICATIONS
Asked by: ASHOK SHANKARRAO CHAVAN, T. RADHAKRISHNAN

## GOVERNMENT OF INDIA MINISTRY OF COMMUNICATIONS DEPARTMENT OF TELECOMMUNICATIONS

## LOK  SABHA STARRED QUESTION NO. 123 TO BE ANSWERED ON 27 TH      DECEMBER, 2017

## DEBT OF TSPs

- *123.  SHRI ASHOK SHANKARRAO CHAVAN: SHRI T. RADHAKRISHNAN: Will the Minister of COMMUNICATIONS be pleased to state: (a) whether the country's telecom sector is reportedly experiencing financial stress; (b) if so, the details thereof including the total debt of the Telecom Service Providers (TSPs), TSP-wise; (c) whether the Government has constituted any inter-ministerial panel to look into the issue; (d) if so, the details thereof along with the major recommendations made by the said panel; and the action taken/being taken by the Government on the recommendations of the panel including fiscal and structural support to the telecom sector to bring down their
- (e) debt and to save 150000 jobs in the sector?

## ANSWER

## THE MINISTER OF STATE (IC) OF THE MINISTRY OF COMMUNICATIONS & MINISTER OF STATE IN THE MINISTRY OF RAILWAYS (SHRI MANOJ SINHA)

- (a) to  (e) A statement is laid on the table of the House.

Contd………2/-

## STATEMENT  TO  BE  LAID  ON  THE  TABLE  OF  LOK  SABHA  IN  RESPECT  OF PARTS  (a)  TO  (e)  OF  LOK  SABHA  STARRED  QUESTION  NO.  *123  FOR  27 TH DECEMBER,  2017 ON 'DEBT OF TSPs'.

(a) There are pockets of financial stress in the sector as per Inter Ministerial Group (IMG) Report. However each TSP has varying level of debt exposure, different capital structure, varying cash flows and hence varying levels of repayment capacity. Hence, as per IMG Report, the entire sector cannot be said to be in financial stress.

(b) No such information is available. However, as per IMG Report, the total debt of Telecom Sector is as follows:

| Particulars                          |   Telecom Service Provider | Tower Companies   |   Total |
|--------------------------------------|----------------------------|-------------------|---------|
| Indian Debt                          |                     159675 | 18049             |  177724 |
| Foreign Debt                         |                      83918 | -                 |   83918 |
| Total Bank/FI Debt                   |                     243593 | 18049             |  261642 |
| Bank Guarantees                      |                      50000 | -                 |   50000 |
| Deferred Spectrum Liabilities of DoT |                     295864 | -                 |  295864 |
| Other Third Party Liabilities        |                     175464 | 4763              |  180227 |
| Total Outside Liabilities            |                     764922 | 22812             |  787734 |

(c) & (d) Yes  an  Inter-Ministerial  Group  (IMG)  was  constituted  on  16/05/2017. Committee of Secretaries (CoS) had discussed the issue relating to stress in balance sheet in select sectors in its meeting held on 29 th March 2017. Consequently, an InterMinisterial  Group  (IMG)  was  constituted  on  16/05/2017 with following terms  of reference:

-  To examine systemic issues affecting viability and repayment capacity in telecom sector and furnish recommendations for resolution of stressed assets,
-  Policy reforms and strategic interventions for Telecom sector.

The IMG held eight meetings and also held consultations with all the major TSPs and the Banks. Based on these and other sectoral data IMG analyzed the nature and extent of financial stress in the telecom sector and made a set of recommendations.

The IMG noted that the financial stress for some has been caused because of low operating cash flows over a number of years, inadequate equity infusion and debt which  does  not  appear  sustainable.  The  sector  is  in  the  midst  of  consolidation.  The competitive context of the industry has led to accumulation of debt, a decline in EBIDTA and  requirement  of  periodic  infusion  of  additional  equity.  In  view  of  this  the  primary solutions to the current problems in the sector will come internally from the TSPs and they  remain  liable  to  service  the  debt  taken  by  them.  Any  proposed  government intervention needs to be carefully calibrated to ensure that the short term pain points are somewhat eased giving the sector time to rework its investment and business strategy.

The major recommendations of IMG are as follows:

-  Replacement  of  the  current  provision  of  PLR  (Prime  Lending  Rate)  by  MCLR (Marginal  Cost  of  Lending  Rate)  as  the  interest  rate  on  delayed  payment  of License Fee (LF) & Spectrum Usage Charges (SUC) -One year MCLR of SBI may be adopted with effect from the date of its introduction by RBI i.e. April 01, 2016 in place of PLR.
-  Amendments  to  Spectrum  Trading  Guidelines  -  DoT  may  issue  appropriate clarification  that  only  the  gain  or  profit  arising  from  trade  of  spectrum  shall constitute  as  part  of  revenue  for  the  purpose  of  calculation  of  Adjusted  Gross Revenue (AGR).
-  Deferred Payment Liability of TSPs on Spectrum - TSPs may be given a onetime  opportunity  to  opt  for  higher  number  of  instalments  (16)  instead  of  the currently  permitted  10  instalments.  The  matter  needs  further  approval  by Cabinet.
-  Spectrum Auction and Reserve Price of Spectrum - (a) The approach to fixing the  reserve  price  for  spectrum  may  be  reviewed  for  optimization  in  line  with international best practices. (b)The next Spectrum auction may be conducted at a  time  as  considered  appropriate  by  the  Government.  (c)The  exercise  of Harmonization of spectrum in 2300 MHz and other bands may be taken up on priority.
-  Spectrum  Cap  Holding  -  DoT  may  consider  the  issue  in  consultation  with Telecom Regulatory Authority of India (TRAI).
-  Mortgage of Spectrum - (a) Tri Partite Agreement (TPA) may be reviewed to be in line with IBC in consultation with Department of Financial Services (DFS). (b) Extend the new TPA guidelines to all access licenses.
- (e) Action  for  obtaining  necessary  approvals  is  underway,  including  consultations with TRAI and other Government  Departments.

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