The Telecom Regulatory Authority of India has suggested a financial restructuring package for the telecom industry, similar to the ones worked out for the steel and the textile sectors.

Trai chairman Pradeep Baijal outlined his proposal on October 12 during a meeting of the group of ministers looking at unified licensing for the telecom sector.

Telecom package

The financial restructuring package for the telecom industry is similar to the ones worked out for the steel and textile sectors As part of the package, the government could extend the maturity period of loans or reduce the interest rates on rupee debts According to COAI, the total accumulated losses of the telecom industry was Rs 7,900 crore in March 2003

Baijal, who was a special invitee at the meeting, said there was no reason why the government should compensate cellular service providers if a unified telecom licence was introduced.

Nevertheless, the operators are in a tough position financially and the government may have to consider a relief package.

As part of the restructuring package, the government could extend the maturity period of loans or reduce the interest rates on rupee debts.

For the steel industry, the government had extended loan maturity periods from eight years to 14. At the same time, the interest rate on rupee debt was lowered from 18 per cent to 14 per cent and the companies were allowed to part convert domestic debt to foreign currency debt at lower interest levels. Also, some companies wrote down equity by 40 per cent.

In a presentation to the ministerial group, the regulator pointed out that the consolidated amount sanctioned to the telecom industry by leading financial institutions was around Rs 8,480 crore (Rs 84.8 billion). Of this, Rs 4,071 crore (Rs 40.71 billion) has been allocated, while another Rs 2,664 crore (Rs 26.64 billion) is outstanding.

An internal note circulated to members of the group has pointed out that telecom companies took loans at high rates of interest, in the range of 12-14 per cent, but the rates have now come down dramatically to 7-8 per cent. One suggestion is to bring these costly loans in line with the new interest rates.

The Cellular Operators' Association of India points out that the accumulated losses of the telecom industry has been climbing and stood at Rs 7,900 crore (Rs 79 billion) in March 2003.

That was up from Rs 7,100 crore (Rs 71 billion) a year earlier and Rs 6,350 crore (Rs 63.5 billion) in March 2001.

It is on the basis of these figures that cellular operators said they would need Rs 18,400 crore (Rs 184 billion) in compensation if unified licensing was introduced.

However, a second presentation to the group of ministers by Housing Development Finance Corporation chairman Deepak Parekh suggested that cellular operators be compensated by reducing the revenue they share with the government, which is 8-12 per cent depending on the circles.