First and foremost, this is an excellent package that the government has come up with for the telecommunications sector. All the measures indicated in structural reforms are very sensible and rational and were probably things that should have been done some time ago.

Likewise, procedural reforms address areas that have been calling for attention for a long time. These reforms tackle really important issues – uncertainty about when spectrum auctions would be held; complicated process for importing wireless equipment; heavy manual KYC requirements that are an anachronism in a digital industry. The online authorization of telecommunications towers is also a very important procedural reform.

All structural reforms – for example, the elimination of non-telecom revenues [from AGR] is a very obviously desirable measure that has been required for some time. The previous situation, where telecommunications companies generally had only telecommunications revenues and non-telecommunications revenues were only an insignificant part, is no longer valid. It hasn’t been for a decade or more now. It didn’t make sense to continue with that definition. Likewise, the requirements for bank guarantees were unnecessarily onerous and burdensome – this was very significantly reduced without much loss of effectiveness of the measure.

The extended spectrum duration to 30 years with a 10-year exit option provides both certainty and an escape route for telecoms operators in case business does not go as planned. Abolishing spectrum fees for future auctions and facilitating spectrum sharing are very welcome and rational steps.

The other category of reforms announced aim to remove some of the liquidity problems facing players in the sector, notably Vodafone Idea, but to a lesser extent Bharti Airtel and to a very small extent Reliance Jio. This problem was sought to be resolved by deferring payment for up to four years but protecting the NPV at the present value.

Giving the opportunity to pay contributions in the form of an equity offer provides an escape route for a business from a cash outflow. It is in two parts, for which we will have to wait for details. Part is to pay the amount of interest in the form of equity given to the government. The second is the possibility of converting the amount due (principal) of the deferred payment into equity to the government at the end of the moratorium period. The [equity conversion of] interest appears to be at the option of the TSP, while that of the amount owed is at the option of the government (ie acceptance of an offer by the TSP). We’ll have to wait for the fine print to see what kind of equity – is it equity preferably or at pari passu (on an equal footing) with the original promoters, etc… all these questions will come back later. In a sense, this measure provides a mechanism for not forcing the extraction of cash from a business. Of course, that means diluting the ownership somewhat, again depending on the fine print of the contribution or interest conversion provision to equity.

Overall, for the sector, this [package] is a very good thing, there is no doubt about it. A set of thoughtful and reasoned, rational measures, which provide the oxygen that the sector sorely needed.