Ind-Ra Report: Telecom Bill may not hasten insolvency cases

27 Sep 2022 , 06:57 AM

A domestic rating agency warned on Monday that the draft Indian Telecommunication Bill might not speed up the process for insolvent enterprises in the industry. According to India Ratings and Research, the bill’s provision that the government retains ownership of the spectrum suggests that creditors cannot sell the spectrum’s worth under the Insolvency and Bankruptcy Code.

The proposed law also states that the government reserves the power to seize the spectrum from an insolvent telecom operator if they do not pay their taxes, which raises more questions about the telecoms’ capacity to continue operating, according to the agency.

According to the article, even the National Company Law Appellate Tribunal declared in a July 2021 judgment that a stressed telco cannot be admitted to insolvency procedures until all government debts have been paid.

Given that the struggling telcos could not have the financial flexibility to pay off government obligations and/or have the operational cash flows to service the ongoing regulatory fees, the agency stated that the impact of the bill on the resolution process has to be determined.

The measure stipulates a system for allocating revenues to telecoms that are insolvent and unable to pay taxes into a separate designated account, however, it was noted that how this framework will really be put into practice is yet unknown.

The agency added that the law aims to offer a single point of clarification on a number of significant issues that have impacted the telecom sector over the previous two years.

According to the agency, it intends to clear up any doubts over spectrum ownership for businesses that are insolvent or under stress, as well as the organization in charge of overseeing OTT and internet service providers.

The bill also gives the government the authority to relieve the pressure on telecom businesses by waiving, deferring, or restating regulatory fees, it stated.

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