RBI moratorium on loan repayments a short term breather for telcos

The three-month moratorium on bank term loans and working capital finance offered by the Reserve Bank of India (RBI) in response to the raging pandemic is likely to offer some short-term cash-flow respite and improve the liquidity levels of telcos, especially Vodafone Idea and Bharti Airtel, analysts and industry experts said.

Experts though have called on the government to consider a three-month moratorium on operators’ revenue-share commitments for the April-June quarter FY21, which would be more significant relief for the debt-laden telecom sector that is currently reeling under the impact of the AGR payments crisis.

“The three-month moratorium on term loans would offer some short-term relief and improve telcos’ liquidity levels, but the actual quantum of cash flow relief depends on the term loan repayment structures that would vary for each telco,” Prashant Singhal, Global Telecommunication Leader, EY told ET.


The government, on the contrary, he said, “could provide significant relief by considering a three-month moratorium on the revenue share payouts for the upcoming April-June quarter that could collectively provide a combined relief of roughly Rs 4,000-4,500 crore to the Big 3 operators”.

Telcos meet their revenue share obligations by paying a percentage of their adjusted gross revenue (AGR) as licence fees and spectrum usage charges (SUC) to the telecom department. They pay 8% of their AGR as licence fees and around 4% as SUC.

Rajan Mathews, director general of the Cellular Operators Association of India (COAI), welcomed the 3-month moratorium on term loans delivered by the central bank, saying “it would partly alleviate immediate cash flow needs and generate some liquidity for the struggling telcos and help then pay staff salaries and meet working capital expenses such as payments to vendors, tower partners, diesel costs, amongst others.

Ex-Bharti Airtel CEO Sanjay Kapoor though feels a three-month moratorium on term loan instalments might not be adequate for the telecom sector that is under acute financial stress. “Things would be better if the moratorium is extended to six months, given the financial stress and challenges the sector faces, especially at time when it’s playing a crucial role in managing the increase in home internet consumption and keeping India Inc operational amid countrywide lockdowns caused by the pandemic,” he said.

Industry estimates peg the combined cash flow relief for the Big 3 telcos following the 3-month moratorium at around Rs 4,000 crore in terms of servicing their debt, which will not enough for a sector saddled with a whopping Rs 7 lakh-crore debt burden, further exacerbated by the AGR dues payments crisis.

At press time, Airtel, Vodafone Idea and Jio did not respond to ET’s queries.

Earlier this month, the Supreme Court scrapped the self-assessment of AGR dues but agreed to consider the government’s plea on allowing impacted telcos such as VIL, Bharti Airtel and Tata Teleservices to stagger their AGR payments over 20 years or less. The matter will be taken up at the next hearing.