India

Relief to distressed telecom companies; Union Cabinet gives green signal to aid package

The Union Cabinet has taken a reassuring decision to the troubled telecom companies. The decision will benefit telecom companies like Vodafone Idea and Bharti Airtel. A senior official told Reuters. He further said that information about this will be given soon. Positive news has led to a rise in shares of Vodafone Idea and Bharti Airtel. On the Bombay Stock Exchange, Vodafone Idea gained 2.65 per cent, while Bharti Airtel gained 5 per cent.

Spectrum payments of telecom companies under the package are likely to be suspended for some time. The aid package is likely to include a four-year deferral on adjusted gross revenue (AGR) related payments. The package will help ease the burden on telecom companies. Both Vodafone Idea and Bharti Airtel will be helped. The aid package will mainly relieve Vodafone ID, which is on the verge of bankruptcy. Bharti Airtel’s financial position is much better than Vodafone Idea. However, the decision would be appropriate given the future competition with Reliance Jio.

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A few days back, former Vodafone Idea president Kumar Mangalam Birla had met Union Transport Minister Ashwini Vaishnav. In a meeting on September 1, Birla and Vaishnav discussed the urgent need for government intervention in the region. Vodafone Idea is the third largest telecom company in India. At present, the company has 27 crore users in the country. The government has a debt of Rs 96,300 crore on Vodafone Idea. At the same time, AGR has a debt of Rs 61,000 crore in the form of dues. Banks owe Rs 23,000 crore to Vodafone Idea The company is losing over Rs 7,000 crore.

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