How government's telecom package will benefit telecom stocks? Telecom sector - YouTube

Hi, in today's meeting Union Cabinet approved a major relief package for the telecom sector.

In this package, a total of 9 structural reforms & 5 process reforms has been approved in telecom.

Telecom minister, Ashwini Vaishnav said that these reforms will change the entire telecom framework.

During this time, telecom companies like Vodafone-Idea and Bharti Airtel are under stress due to AGR.

These reforms can reduce their burden.

After this news, the share prices of telecom companies have risen.

Bharti Airtel’s stock price closed at a 4.8% high.

Vodafone-Idea share price closed by 4.02% high.

In today's video, we will tell you about telecom sector-related major reforms

approved by Union Cabinet in their meeting.

The first and most important reform is Adjusted Gross Revenue i.e, AGR's change in definition.

AGR is a gross revenue telecom company in which a certain % is paid to the government in form of fees.

Earlier both telecom and non-telecom revenues were included in AGR.

In today's meeting, the government changed the meaning of AGR

and excluded non-telecom revenues.

The second major relaxation is related to the repayment of dues in the telecom sector.

Telecom companies will get a 4year moratorium period on their dues

which will start from 1st Oct 2021.

In this moratorium, both AGR dues and Spectrum dues are included.

That means telecom companies can start repaying their dues after 4 years.

This move will resolve cash flow problems in the industry.

Companies can utilize their cash in business operations and technology upgradation.

To be noted, interest payable will be on the amount for which the company will take benefit.

The third major reform is 100% Foreign Direct Investment (FDI) through automatic route has been approved by the center in the telecom sector.

Before this, only 49% of investment was allowed through the automatic route.

Above this, any investment was made through the government route.

The fourth major reform is related to spectrum charges.

Earlier there were heavy charges and penalties on spectrum charges.

But after today's meeting, the penalty has been eliminated.

Also, the interest payable on spectrum charges will be compounded yearly despite monthly.

Telecom minister, Ashwini Vaishnav said that because of these two decisions

big investment can come in the telecom sector generating employment opportunities.

For future spectrum auctions, the holding period has been increased to 30years from 20 years.

Telecom companies after a 10 year lock-in period,

can pay a surrender charge to surrender their spectrum.

This will give flexibility to telecom firms and won't be paying charges for unused spectrum.

Other than this, spectrum sharing has been allowed between telecom companies

without any additional costs.

More changes have been announced which will reduce the expenses of telecom companies.

One is digitalizing the KYC process so that there is no paperwork to acquire new customers.

Customers who want to shift from prepaid to postpaid or visa versa, won't require to renew KYC.

One more change is that calendar will be created for spectrum auctions.

Finally, the process of towers setup has been simplified.

So these were reforms and changes which Cabinet announced in today's relief package.

According to analysts, these reforms will support telecom companies.

We hope you found this update informative

and understood how this relief package can benefit telecom companies.

We will be bringing such updates in the future.

These videos are for educational purposes only and there is no buy or sell recommendation.

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Bye-bye.