Vodafone-Idea will become a government company if the dues are converted into equity

 The Department of Telecom (DoT) may issue guidelines in two weeks for how to convert the dues of telecom companies into government equity. This is a big relief especially for Vodafone-Idea. But experts believe that if the dues are converted into equity, it will essentially become a government company. Credit Suisse has said in a research report that the government's stake in Vodafone-Idea could be 70 percent.

Bharti Airtel chairman Sunil Bharti Mittal has also said that he will use the four-year moratorium for making annual revenue (AGR) related payments. With this, the company will get Rs 35 to 40 thousand crores to invest in network and technology. His assessment is that if the interest amount is converted into government equity, then only 2 to 3 percent stake will have to be given to the government.

Provision of Moratorium for four years

The cabinet on Wednesday announced a relief package for the telecom sector. There is a provision that the government can take equity stake of companies in lieu of dues of license fee, spectrum usage charge, interest and penalty. The government has given four years' relief to the companies for payment of dues. That is, companies will not have to pay the dues for four years. However, they will have to pay some interest on this. After four years, the government will have the option to take a stake in the company for the interest amount or the entire dues.

Companies are also expected to get relief in spectrum usage charges. According to the decision of the cabinet, companies will have to pay a one-time amount for future spectrum auctions. There will be no user charge on it every year. At present spectrum usage charges have to be paid as a part of AGR. There is a different calculation formula, according to which Airtel has to pay 4 to 5 per cent of AGR in most circles and 3 to 4 per cent usage charge for Reliance Jio. For Vodafone-Idea, it is more than 5% in most circles.

Ease of taking loan due to low bank guarantee

The government has also decided to reduce the bank guarantee for telecom companies. According to reports, if Vodafone-Idea and Bharti Airtel use the 4-year moratorium, the government may return bank guarantees of Rs 14,000 crore to Vodafone-Idea and Rs 8,000 crore to Airtel. This will pave the way for banks to give more loans to companies. As per the old rules, companies were required to furnish bank guarantees against all payment dues. 100 percent bank guarantee had to be given in lieu of license fee etc., which has been reduced to 20 percent. This will also help companies to take more loans from banks.

Meanwhile, rating agency Icra has estimated that this year the government will get non-tax revenue of Rs 28,000 crore from the telecom sector. A provision of Rs 54,000 crore was made for this in the budget. This can have an impact on the fiscal deficit. However, while giving information about the cabinet decision, Telecom Minister Ashwini Vaishnav had said that the effect of the package for the government will be revenue-neutral, that is, neither profit nor loss.