No payment for acquisition of equity stake in telcos, move aimed at easing debt burden: Centre clarifies

In an FAQ statement, the government explained why the equity option was provided to the TSPs instead of recovering the dues by way of monetary transactions.

"The telecom sector has gone through a long period of litigation.  As a result, all the telecom companies have high amounts of liabilities that have arisen due to various legacy issues.  These legacy issues have put the Indian telecom industry under stress," the statement read.

Emphasizing the importance of the telecom sector, especially in light of the challenges thrown in by the Covid-19 pandemic, the government introduced many structural and procedural reforms in September 2021 in a bid to alleviate the debt burden of the ailing sector.

As a part of these reforms, the TSPs were given the option to convert some certain interest liabilities owed to the government into equity/preference shares in favor of the government.

"While some companies have opted not to convert their liabilities into equity/preference shares, three companies have exercised the option of converting liabilities into equity/preference shares.  They have offered this option to the government in lieu of their liabilities," the statement explained.

The government can sell these shares at an appropriate time and thereby receive the amounts due, it stated underscoring the logic behind providing the option of government equity to TSPs with the motive to put the debt-ridden companies back on track.

It further explained that the government's acquisition of stakes in these firms will not convert them into PSUs and they will continue to be managed as professionally run private companies.

The telecom reforms are aimed at supporting the sector amid the pandemic and enabling the companies to sustain their business.

Further, the statement underscored that one of the objectives of the reforms is to prevent monopoly or duopoly.

"It will also stop a scenario where there are very few players in the market. Such potential lack of competition could lead to higher prices & poor services. Enough competition in the market safeguards the interests of the common man," it read.

With the conversion of liabilities into equity/preference shares, the telecoms will be able to spare their monetary resources to invest and provide better services adopting new technology and also expand coverage, including far-flung areas.

While the NDA government came up with sweeping reforms to support the cash-strapped private TSPs, it is frequently questioned over the measures taken to revive the state-owned BSNL and MTNL.

A package worth Rs 70,000 crore has been approved to revive and grow BSNL and MTNL, the government said.

It noted that MTNL and BSNL had been systematically weakened in the past as they were not allowed to upgrade technology and consequently lost market share and got burdened with a debt of about 59,000 crores.

With the development of Indian 4G and 5G technologies, BSNL is in the final stages of 4G POC and the PSU has been allocated funds to acquire the 4G spectrum.

"All these steps have enabled BSNL to survive through the highly competitive phase," the statement further read, adding that BSNL has attained the capability to provide high-speed internet services to more than 20 lakh households.