The Narendra Modi government has unveiled a package of measures that professes to ease the pangs of the telecom sector and seemingly heads off the prospect of an emerging duopoly — an undesirable outcome that will stifle competition and compromise the interests of the consumer. Both the industry and the markets have reacted positively to the measures but it may be too early to jump to the conclusion that a floundering Vodafone Idea has been saved from the brink of financial ruin. That is not certain because the devil still lurks in the details. The 18 measures have been lumped under three heads: structural reforms, procedural reforms, and steps to address the liquidity concerns of telecom service providers. The big relief for Vodafone Idea and Bharti Airtel is the four-year moratorium that has been granted to them to pay back the mounting telecom dues. Vodafone Idea owes the government over Rs 500 billion and Airtel needs to cough up a little over half that amount. The Centre has also granted them the option to convert the unpaid interest into equity at the end of the deferment period while retaining its discretion to convert the outstanding principal amount into shares.

Industry will also need to figure out whether the proposed change in the definition of adjusted gross revenue, which forms the basis for the computation of telecom dues, will eventually prove to be beneficial. The Centre has said it will cull the ‘non-telecom’ revenue elements from the AGR definition without elaborating on what these are. The so-called formula was a major bone of contention until the Supreme Court resolved the quibble in the government’s favour by stating unequivocally that telecom service providers could not resort to accounting jugglery and nitpick on the formula. The government has finally seen reason. However, the industry will have to wait and see whether the Centre will agree to dovetail the formula to the accounting standards prescribed under the Companies Act.

A couple of other decisions are clearly welcome: the radio waves farmed out through future auctions will be granted for a 30-year tenure instead of 20 at present. Telecom companies will be encouraged to share revenue without being burdened with a fee for such arrangements. The move to allow foreign direct investment up to 100 per cent under the automatic route will need to be examined closely. After Vodafone’s experience with the retrospective tax, there are very few telecom players that will be ready to enter the country. Private equity players have also become more circumspect about investing in a sector that has been wallowing in losses. Experts warn that unless the promoters pump money into the business and raise tariffs, Vodafone Idea will continue to flounder, amplifying the risk of the industry contracting into a duopoly. The pall over the telecom industry has lifted — but only slightly. There is a long way to go before it can haul itself out of the rut.