Telecom Bill May Not Help Hasten Insolvency Cases In Sector: Ind-Ra

The draft Indian Telecommunication Bill may not help accelerate the resolution process for insolvent companies in the sector, a domestic rating agency said on Monday.

The bill stipulates that the ownership of spectrum remains with the government, and hence implies that the value of spectrum cannot be sold by creditors under the Insolvency and Bankruptcy Code, India Ratings and Research explained.

The draft law also mentions that the government reserves the right to take back the spectrum if the ailing telecom operator fails to pay government dues, which further adds concerns to the operational viability of such telcos, the agency said.

The report further said even the National Company Law Appellate Tribunal had ruled that government dues must be cleared before a stressed telco is admitted to insolvency proceedings in an order passed in July 2021.

"Impact of the bill on the resolution process needs to be seen, given that the ailing telcos may not have the financial flexibility to clear government dues and/or have the operational cash flows to service the ongoing regulatory charges," the agency said.

The bill provides for a framework for placing revenues in a separate designated account for the telcos under insolvency, which are unable to pay government dues, but the implementation of the same remains to be seen, it added.

The agency also said the bill intends to provide one-stop clarity on several key aspects that have affected the telecom industry over the past two years.

It aims to remove ambiguities over the ownership of spectrum for the corporates under insolvency/stress as well as the regulating body for over-the-top (OTT) and internet service providers, the agency said.

The bill also empowers the government to provide relief to stressed telecom companies through waiver/deferment/restatement of regulatory dues, it added.